Claims along these lines have caused a great deal of confusion in recent decades.

If the “longer period of time” is defined as “30 years,” this claim is accurate. Stocks have always provided a good return in 30 years.

If the “longer period of time” is defined as “five year” or “10 years” or “15 years” or “20 years,” this claim was inaccurate for the entire time-period from 1996 through 2008. For that entire time-period, stocks were selling at such insane prices that the longer you held them (short of 30 years), the more certain you were to do worse in stocks than you were in just about any other asset class.

It’s not that stocks are always best for the long run. It’s that stock returns become more and more predictable the farther you go out. Even at times of insane prices, stocks can do well for a year or two or three. But there’s virtually no hope of stocks doing well in the long term when you buy them at the prices that applied from 1996 through 2008.

Unless you define “long term” as “30 years.” Then the Passive Investing claims really do hold up to scrutiny. We’ve never yet reached prices so high that stocks didn’t end up doing well at the end of 30 years.

Rob

I’m simply saying that as the length of time increases, so too does the likelihood that “expected” outcomes will occur.

Unfortunately, what makes sense is often what people fail to do.

The average return of investments far exceeds the average return of investors precisely because expected hold is far greater than actual hold period.

Folks are overtaken by their emotions. This is an important article because it reinforces and reiterates the concept of hold period. Thanks….

Also, the longer your time frame, the wider the range of the potential outcomes will become. Many people mistakenly believe that risks associated with investing decrease over time. One of the greatest risks, that things won’t go as planned, actually increases as the time frame increases.