NCPA - National Center for Policy Analysis

There's Nothing Like Stocks For The Long-term

August 2, 2002

Some politicians are seizing on the stock market's present tumult to warn Americans against investing in stocks for retirement. Nevertheless, experts point out that stocks have long been -- and will continue to be -- the best means to build a secure retirement.

  • An analysis by Ibbotson Associates of the Standard & Poor's 500 over the past 75 years reveals a 29 percent chance that an investor would lose money if he invested for only one year.
  • The risk dropped to 10 percent over a five-year period, to 3 percent over a 10-year period and to zero over 15 years.
  • Investors who held stocks for 20 years saw compound annual returns of about 11 percent -- compared to 5.3 percent for government bonds or 3.8 percent for Treasury bills.

Clearly, the sooner in his career a worker starts to invest, the safer and larger his return will be when he approaches retirement -- much larger and much safer than relying on Social Security, which will start running a deficit in just 14 years.

One dollar invested in the S&P 500 at year-end 1925 would have grown to $2,279 by the end of 2001 -- but only to $17.20 if it had been invested in Treasury bills.

Some politicians are using today's market to scare Americans away from saving for retirement through private retirements accounts. Experts say they should be more honest with the American people.

Source: Editorial, "The Great Retirement Scare," Wall Street Journal, August 2, 2002.

For WSJ text (requires subscription),,SB1028246815724454840,00.html


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