Barry Rithholz of Big Picture Blog has a presentation deck titled Crashes, Sharks, Terrorists, Oh My!  He uses data to show how many of our most common fears have an incredibly low probability of occurring (more people die each year from taking selfies than are killed by shark attacks). Here are four of the investing-related charts that I found most interesting that you might want to incorporate into your investing lessons to show the value of diversification, the folly of trying to beat the market and how investors are their own worst enemy:

• Investors feel the pain of losses much more than the joy of gains:

• Average investor performs much worse (5.31% per year!) than if they had just invested in stock index fund. Why? Try to time the market, buy high fee actively managed funds, get scared and buy high and sell low, fourth slide has more reasons)

• Value of diversification: Even in a decade where the S&P500 was down 9%, if you owned other asset classes (bonds, value stocks big and small, real estate) you would have done just fine!

• Why investors underperform: while the slide has institutional (or professional) investors in the title, this applies as much to individual investors too.

__________

Check out the NGPF Activity that will teach your students how to create an investment portfolio.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

More posts by Tim