Course 103: Investing for the Long Run
Over the Long Term, Stocks Are Best
In this course
1 Introduction
2 Volatility of Single Stocks
3 Volatility of the Stock Market
4 Over the Long Term, Stocks Are Best
5 Time Is on Your Side
6 Why Stocks Perform the Best
7 The Bottom Line

Despite all the short-term risks and volatility, stocks as a group have had the highest long-term returns of any investment type. This is an incredibly important fact! When the stock market has crashed, the market has always rebounded. And over the very long term, stocks have outperformed bonds on a total real return (after inflation) basis, on average.

If you had deplorable timing and invested $100 into the stock market during any of the seven major market peaks in the 20th century, that investment, over the next 10 years, would have been worth $125 after inflation, but it would have been worth only $107 had you invested in bonds, and $99 if you had purchased government Treasury bills. In other words, stocks have been the best-performing asset class over the long term, while government bonds, in these cases, merely kept up with inflation.

This is the whole reason to go through the effort of investing in stocks. Again, even if you had invested in stocks at the highest peak in the market, your total after-inflation returns after 10 years would have been higher for stocks than either bonds or cash. Had you invested a little at a time, not just when stocks were expensive but also when they were cheap, your returns would have been much greater.

Next: Time Is on Your Side >>


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