Conventional stock-market wisdom holds that if investors buy a broad range of stocks and hold them, they will do better than they would in other investments.

I don't get this "wisdom". Over the long term and with a broad enough range of investments, shouldn't any such investment collection, tied to the economy as a whole, really grow as much, and only as much, as the economy as a whole does?

How can any kind of investment be a "free lunch"?

Yet the rich, who make their money from investments, have supported Bush.

Conventional stock-market wisdom holds that if investors buy a broad range of stocks and hold them, they will do better than they would in other investments.

The study most cited took any 20 year period from just after the civil war to the present, including the periods that included the great depression, not a 10 year period.

Yet the rich, who make their money from investments, have supported Bush.

This poster needs to be told about the percentage of total stock value held by working class and middle class and their retirement plans.

shouldn't any such investment collection, tied to the economy as a whole, really grow as much, and only as much, as the economy as a whole does?

Roughly, yes. However, keep in mind that stock indices add healthy companies to their index that are major parts of the economy and discard companies that are less and less relevant to the economy, so there's a bit of bias towards companies that are overall healthier than the economy as a whole, which should, theoretically, produce returns that are higher than average than the GDP as a whole.

None of that, however, changes the fact that the past 10 years haven't been so good. ElV's claims aside, that's quite important because even if the stock market returns of the past 20 years have been good (more than 9% on the dow since Jan '08, if my back-of-the-envelope calculations are correct), all that means is that the money you had in 1988 got good returns. The money you invested since 1998 hasn't really gone anywhere. But you can't time the market, so that's what it is.

The US benefits from having a steadily increasing population and doesn't face any Malthusian crises, so the economy, and thus the stock market, will steadily grow, for the most part. In Japan, with a steady or falling population whose corporations are sending money outside the country to expand, it's simply not worth it for them to put their money in their domestic stock markets.

More than 9% on the dow since Jan '88, I meant to say, of course. But I'm sure you figured that out.

Actually,

If you look at "baskets" of socks over 100 years time they barely match inflation.

There is "insider trading" in all it's forms and then there is the suckers. You be the suckers, although with enough stroking of your ego...you'd do it again wouldn't you?

I really pity the "Reagan Children" who have been sold so many lies. If you had been around people who truly understood the the pre-FDR when you were young you would know that much of the post Reagan CW was a heaping pile of dung.

Should have said:

at "baskets" of stocks

the pre-FDR world

This poster needs to be told about the percentage of total stock value held by working class and middle class and their retirement plans. - El Viajero

I know I keep harping on it, but I'll say it again -- the sheer volume of investments in the market, the sheer supply of capital for investments and the sheer demand for investment vehicles (which is matched by people coming up with ever more complex and bizarre "investments") is bound to have a distorting effect on our markets.

It's like the switch from laminar to chaotic flow -- once the system is overwhelmed, funny stuff starts to happen ... in our economy we saw waves of pension-fund-managers-demanding-income-stocks driven layoffs (for corporate profit enhancement); we saw bubbles inflate and burst; etc.

That we have so many people so desparate to have enough for retirement really takes resources out of our economy here and now (as they are being hoarded for later) ... even if the "savings" are supposedly being "invested" into our present economy.

Really, what we are seeing is that FDR was right: we do have to fear fear itself. How much of our economic bumpiness is really being caused by boomers freaking out about a lack of social security? How much of it is "social insecurity"?

And now the money questions (pun intended): why are people freaking out? and who stands to profit by spreading all this talk about social security failure? follow the money ...

Anyway, what we really need is a more robust system of social security (as well as to ease the burdon of debt) -- perhaps young and healthy people can get debt forgiveness by participating in efforts that directly benefit the elderly and prevent them from having to rely on investments gone sour (with some direct replacement for good investments by big-shitpile so someone is left holding the bag, so to speak, but with some security that they are not depending on what they are holding?).

"The WSJ is too polite to ask this question, but I'm not. Suppose we had invested Social Security in the stock market?"

Well, according to the linked article, if the money had been invested in an S&P fund in 1998, it would have gained an average of 1.3% a year.

Money invested in government bonds (which is where it is) would have done better of course, although this is mitigated by the reality that we pay the interest we get. Presuming however that we were going to borrow (and thus pay interest) in any event, which is logical, it certainly seems like in 1998 we got a better deal. Now, if we look at 2002 to the present, that changes, as it does if you look at 1994 to 2004.

They're excluding dividends and not counting total returns, but yeah, since 1998 the S&P500 has not done very well. Notice they don't take into account the huge runup in prices since 2003, or the high average returns people would have gotten if they began in 1993. That's why long-term investing is measured in decades, not 10-year periods.

That's why long-term investing is measured in decades, not 10-year periods.

They know that. They know.

It's just dishonest

"Yikes. Looking at all this, Dean Baker says, "The WSJ is too polite to ask this question, but I'm not. Suppose we had invested Social Security in the stock market?"

Well, considering that Social Security funds are not invested at all, then we can assume that even a sorry return from the stock market would be better.

The stronger case for individual accounts is that they are owned by individuals. Basically, if I pay 15% of my income for 50 years, I'd be a multimillionaire when I retire, whether I get a 2 percent return or a 12 percent return.

Under the current system I could die at 64 1/2 years old and leave nothing to my children.