Newspaper article THE JOURNAL RECORD

Longrm Investing Hard to Sell Youth

Newspaper article THE JOURNAL RECORD

Longrm Investing Hard to Sell Youth

Article excerpt

In a marketplace of uncertainties it has a solid record, but few brokers want to sell it, partly because few buyers are interested.

It is especially hard to sell to young people, who can benefit the most, and almost as hard to sell to the elderly, whose preference often is for current income rather than longrm goals.

It is longrm investing.

A dollar invested in the stock market at the beginning of 1940 and left untouched would have bought 32 times as many goods and services in 1990 as when the initial investment was made.

While that result, based on the Standard Poor's 500-stock index, does not take account of taxes, it does discount for inflation. Over that period, the return exceeded the rate of inflation by 7.4 percent a year.

At that rate, money doubles in 10 years. Assuming a $1,000 investment, the owner would have had $2,000 by 1950 and $4,000 by 1960. The power of compounding grows with time. By 2000, that $1,000 might be worth $64,000.

It didn't work out precisely that way, since markets never trace a straight line. In the 1950s, growth was at an inflationjusted compound annual rate of 19.4 percent; in the 1970s, it was minus 1.5 percent. But it averaged 7.4 percent.

Such longrm statistical records are well known in the investment community, but they are swamped by statistics of another sort, such as those for the latest sixnth period or projections for the next six months.

Brokers seldom talk about years when "longrm" for tax purposes may be half a year. The latest wiggle on the price charts is analyzed more intensely than the historical record, and it usually creates more interest.

In its concern for the shortrm, Wall Street is similar to the corporate executives who sacrifice the future in order to squeeze out current profits, or elected officials who seek to impress now and let tomorrow take care of itself. …

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