Thoughts while watching the stock market gyrations of the past few weeks: When I was a little kid in South Dakota, I didn’t know anything about Wall Street. Later in school I learned where it was. Tall buildings on narrow streets in New York City.
After World War II, when I finished college and got a job, I thought I knew what Wall Street did. Let people gamble on companies and their stock. I preferred poker or casinos.
But in middle age, as I earned more money, I learned the stock market makes a lot of people rich. I tried my hand at “investments,” many based on hunches or sentiment or tips. Won some, but lost too many.
Belatedly, after age 50, I realized there is one “sure bet” in the stock market. Getting in intelligently and staying in, with regular varied investments.
At first, I chose a mix of stocks listed in the Dow Jones Industrial Average (which now numbers 30 companies). Then I concluded the D-J was a little too narrow and switched to the Standard and Poor (S&P) 500, because it was broader based and has very low fees.
During the 25-year period since 1982, the record for those two:
• D-J Industrial compounded annual average increase, 11.8 percent.
• S&P 500 for the same period, up 13.98 percent.
With such sure long-term performances, why all the hand-wringing of recent weeks? Because of gamblers or game players who get in and out or analysts who are embarrassed when their projections go wrong.
Let them eat cake. If you’re a long-term investor, large or small, a solid stock market index fund like the S&P 500 is still the best bet you can make.
Al Neuharth is founder of USA Today.
