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Many have said "Never bet against America." That has also historically been true of the stock market in America.
In general, if you have some money to invest in the market (instead of saving it in a bank account), and leave it there over most 10 year periods you will be richly rewarded.
America's most famous investor, Warren Buffet, the "Oracle of Omaha," now 92 years young, has long recommended that middle class Americans invest in "index funds" such as the Standard and Poors 500 Index, rather than "gambling" in individual stocks. An index fund is typically a very low-cost investment device.
Anyone following Buffet's advice over the last 10, 20, or 30 years would have done very well.
The S & P 500 Index has looked like this over the last 30 years:
Index % Gain
April 1, 1993 445
April 1, 2003 946 212%
April 1, 2013 1617 363%
April 1, 2023 4134 929%
In other words just $1,000 invested on April 1, 1993, would be worth $9,290 today, way above the rate of inflation.
That same $1,000 increased by 30 years of inflation would only be $2,100.
Lots of things temporarily depressed the market over those years. Some examples are: the terrorist attack on America on September 11, 2001, the financial crash of 2008-2009 (the worst since the Great Depression in the early 1930s), the Great Pandemic starting in March 2020, and the Russian invasion of Ukraine in February, 2022.
Despite some down times, for investors who do not panic during those down times, the stock market in America has performed remarkably well in the "long run."
Having some understanding of the stock market is especially important to young Americans.
For the eight years I taught Business Law to accounting majors at SUNY Fredonia, I stressed to them that they were very likely to be responsible for their own retirement funds some day. Traditional pensions have virtually disappeared from employment in America.
According to a CNN Money article only 4% of workers in the private sector still have a traditional defined benefit pension plan, down from 60% in the early 1980s. About 14% of companies offer a combination of traditional pensions and 401K type retirement plants.
A traditional defined benefit pension plan through your employer promises you a guaranteed monthly retirement income. 401K type plans guarantee you nothing. What you get out of a 401K type plan depends entirely on how your investments in the plan have done.
Younger American workers must either become knowledgeable about how to invest their retirement contributions or pay for a financial adviser who is knowledgeable about investing for retirement.
I also stressed to my college students the critical importance of starting in your 20s to save/invest for your retirement.
The example I gave to each class was as follows:
Jane begins investing at age 25, putting $2,000 a year for 8 years in stocks in a tax deferred retirement plan such as an IRA or 401K. She has saved only $16,000. Joe, however, does not start saving $2,000 a year in stocks for his retirement until age 35, doing so until age 65. He has invested a total of $60,000. But at age 65 Jane's $16,000 has grown to $269,000. Joe's $60,000 has only grown to $244,000, $25,000 less!
This example assumes an 8% annual return in the stock market for Jane and Joe.
This is a tremendous example of the power of compounding earnings.
The earlier a young person starts saving for retirement, the more likely a financially secure retirement will be there when you are in your 60s.
While there are never any guarantees in investing in the stock market, history strongly suggests that young Americans with the discipline to begin investing in their 20s in the stock market will not be overly dependent on Social Security for a financially secure retirement.
When President Franklin D. Roosevelt created Social Security in 1935, it never was intended to be the sole source of retirement income. Today's young workers would be well advised to invest for their retirement in the amazing American stock market
Fred Larson is a 1973 graduate of Princeton University, a 1976 graduate of Yale Law School and served as an adjunct faculty member at the State University at Fredonia from 2007-2014.