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Hey everyone! Have you ever wondered what the best way is to make your investments truly grow in the long term? In today's video, we're going to talk about five lessons from the classic book "Investing in Stocks for the Long Run" written by finance professor Jeremy. Of course, I'll try to adapt these lessons to the Brazilian scenario, showing you how you can apply these strategies to our reality as well.
Stay with me until the end because I'll show practical examples for those who are starting to invest and want to build a solid long- term portfolio. Let's go! Hi, I'm Marcelo Xis, and you're on the channel now. You're learning to invest now! If you already know my work, give it a like, share it with a friend who's interested in the subject, and leave a comment to strengthen the channel's content.
If you're new here, this channel is dedicated to studying investments through spreadsheets and programs that are largely provided for free. There are also several book summaries, like this one I'm doing now, which are a reference for any investor who really wants to develop and gain autonomy in this fantastic and liberating world of investing.
I invite you to subscribe to the channel and click the bell to be notified of upcoming videos. Because every Wednesday there's a new video! Let's go! So, of course, these five lessons are the lessons that I, Marcelo, realized when I read this book. The first lesson: the best asset class for the long term.
The first big lesson from the book is that stocks have historically proven to be the best asset class for those who invest with a focus on decades, not months. Jeremy Seel studied more than 200 years of the American market, but here in Brazil we can see something similar as well. You 'll see that we don't have that 200-year history.
Of course not, we don't even have a 50-year history, but we can already get an idea of what Professor Jeremy Seel is talking about and whether this is also applicable to our reality. We have some distortions, of course, but it's important that you can differentiate this. He wrote this book for the reality of the United States.
I drew these lessons based on reading the book and I'm trying to show you whether this applies or not here in the Brazilian market as well. Let's think about practical examples from our market. If you had invested in the Ibovespa, the main index of the Brazilian stock exchange, over the last 10, 15, or 20 years, you would have...
I've seen good valuations over longer periods, even with specific crises like those of 2008, 2015, 2016, and the 2020 pandemic crash. I've created this program that simulates these movements in the stock market. It's based on real data. Okay, I'm going to run the Bovespa index here, not the ETF Bova 11, for example.
Why? Because Bova 11 was created recently, and since we want to see a longer timeframe, we'll try to visualize that longer period. So I used the Ibovespa, but understand that it follows the same logic. We'll simulate short periods here. I'm simulating one year here; I'm recording this on February 16, 2025.
So, one year ago, February 16, 2024, a period of one year. Let's see how this looks. I'll show you a graph here. Look at this graph; see how much the stock market index fluctuates in one year? Look at these drops here! It seems like the end of the world when you... "It's in the market when you're invested in a stock and it experiences these drops you're seeing here, which seems very worrying.
Now, what the professor is saying is this: in the long term, how does this behave? Let's see, we'll switch to 5 years and see if it softens. Look here, let's see how it behaves. Look, here we have the pandemic period, which hit hard, right? But you already notice an upward trend, and that variation from the last year, the last year we saw, doesn't seem so big anymore.
Let's move to 10 years to see how it looks. Will it continue for 10 years? If you were investing in 2020 during the pandemic, you must have been desperate, otherwise, lucky you, because this is what happened. Look at this drop here, which was gigantic in 5 years, but now it seems like a small thing, right?
Look, in 2016 we had political and financial problems, and there ended up being a change of President, but if you observe, it already starts to trace an upward path, right? Let's see even longer, let's put 15 years later..." Let's extrapolate to a period right here, look, it's already starting to get much shorter, right?
These crises start to appear as mere dots in the overall historical unfolding of the stock market. Let's look at a very long period. I'll put the longest I can, I'll try to put 50 years here, but it's not 50 years old, okay? You see here, this is 16/02/2010, let's put 50 here, but it's not 50 years old, okay?
Let's run it here, it starts here on 16/2/1975, which is 50 years, but our stock market doesn't have that much history, I don't have that much saved. So here it started in 1992 or 1993, I'm not exactly sure, but anyway, it's been many years, right? Now you can clearly see that in this whole period of more than 30 years, this big fall here in 2008, which was the subprime crisis, those who were invested here, like me, Ava, thought the world was going to end because this was simply the American economy collapsing, and the developed countries going along with it, but if you Observe: In this period from here to here, this seems small now, but at the time it caused a lot of suffering and anguish.
Here, a change of President, here, a pandemic. You see, the more time passes, the clearer Professor Jerem Seel's theory becomes. You begin to see this as just a point of oscillation in that past. Let's continue with the quick tip for this topic. So, if you don't like so much oscillation or don't want to suffer from the daily market falls, remember that in the long term these oscillations end up seeming like just noise compared to the total accumulated return.
To clearly see this graph, the second point I took here, the second lesson from this book, is that stocks are less risky than fixed income over a decades-long horizon. This second lesson may sound strange to many people. You may ask, " How can stocks be less risky than fixed income?" The truth is that if we analyze very short periods of one to two years, stocks have high volatility.
This is true; they only go up and down too quickly. However, when we broaden the horizons to 10, 20, or 30 years, Jerem Seel's studies—remember he's talking about the American market— show that... The chance of good returns in stocks increases significantly, while fixed income can lag behind, especially if we consider inflation.
Historically, inflation in Brazil is much higher than in the United States, for example. Well, in Brazil, we have some distortions: first, our inflation is a bit higher, and interest rates are also high. We have direct treasury bonds like Tesouro Selic, Tesouro PCA, and pre-fixed bonds, which are considered low- risk investments.
However, when we talk about the risk of losing to inflation or missing out on potential gains—what we call opportunity cost—stocks offer a greater potential return in the long term. Let's look at another example here, going back to the program. Divo 11, which is an ETF of dividend-paying stocks, because the book talks a lot about dividend-paying stocks.
This is somewhat cultural in the United States. So, just to stay within the same simulation, let's run this here. I'm using the maximum historical data here just to have a good reference. Now I'm going to compare two very classic investments in Brazil: savings accounts, which everyone uses, and another that...
It's the CDI. Look, when you compare, for example, Divo 11 with savings here, the period is short because Divo 11 was created around 2012. You see that savings always have this growth. I'm doing a simulation here, I'm putting in percentages so it doesn't get too complicated. I don't want to be sure of the calculations, I want to show you what the book teaches us.
I want you to understand the concept the book is showing. So when you compare the Divo 11 ETF here, look, over the years, from 12 to 25, we go to 13 years from here on, it has already started to outperform quite a bit, right? Now, if we compare it with the CDI, let's see what happens. Everyone knows that we have a problem with high interest rates, right?
But even so, considering Divo 11, which is a dividend payer, you have that the profitability in these last 13 years of Divo 11 has exceeded the CDI. So it seems to confirm Professor Jer Sigan's thesis. However, if I... Let's put a longer period here. I want to show you, let's put the Bovespa here instead of division 11.
It has a longer history, just so we can try to simulate a longer period. I want to show you a little problem with our stock market. Well, when I compare it to savings accounts, it's a landslide, right? Now, when I compare it to the CDI (interbank deposit rate), a very long period... Look, why does this happen?
Because our stock market, our economy, has a functionality. Our interest rates are very high, so if you regularly invest in CDI with the stock market index, you don't beat the market. Look, it's almost 30, no, more than 30 years, right? You see that the CDI far surpasses our stock market. Oh, so I give up on investing in this?
No, no, that's it. It's for you to understand that we have a dysfunction. I can't take the book and replicate it here in Brazil and say, " No, this will work, it will be like this." No, you have to study, you have to understand the particularities of each market. That's what I'm trying to show you here now.
Do you understand? Now, to prove that the professor isn't entirely wrong. Wrong, I'm going to do another simulation here. Let's take, for example, a very robust company that has been operating for a long time and is very stable. Look, with savings accounts, we already know that the return on savings is very small, but look, when you take Vale from 2000 until now, 25 years, you see that Vale significantly outperforms the CDI (Brazilian interbank deposit rate).
Look, there's also a problem when you invest in assets; you have to know how to choose those assets. Let's look at an asset that, when the telephone companies were privatized, everyone thought would be a goldmine, but it wasn't quite like that. Let's take Oi, our friend. Let's show you that Oi didn't even outperform savings accounts.
It had an upswing until 2008 during the subprime mortgage crisis. It went downhill and continues to do so if you compare this to the CDI. So look, it's a landslide here; I can even compare the numbers. Look, if you invested R$ 273,000, I'm doing the following simulation: each month I put in R$1,000, okay?
That's all. Let's see in monetary terms, the final value of Oi's portfolio, its 273,000 became 8,639.5, the final value of savings was 583,387.96, and the final value of the CDI was 988,859.38. This would be a simulation of each of these assets if you were putting in R$1,000 each month. Okay, so it's all over, there's no way to invest.
Of course not. Well, there are still two more lessons that are very important in the book, and in fact, I think they are the most useful, the best, but I'll leave them for the next video because otherwise this video will be too long. But anyway, you've already seen that you can take this book and apply it to the Brazilian market with great expertise.
Share it with that friend of yours who wants to know about this content but doesn't know it yet. Give it a like, comment if you're enjoying it, if you'd like to add anything else, let's discuss it. If you haven't subscribed, subscribe because I'm sure there's a lot of cool stuff here for you to learn with me.
Okay, thank you very much for staying with me until now. I'll leave it here. Good investments, a hug.
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