Call him Ishmael. On New Year’s Eve, 1948, he is born at Mercy Medical Center in Des Moines. Ishmael’s parents scrape together a “pre–nest egg” of $3,000 out of savings and gifts from relatives. They invest the money in a mutual fund called Lexington Corporate Leaders, which has a portfolio assembled to reflect America’s industrial economy. When Ishmael is 12 years old, his parents tell him about the account but make him promise not to touch the proceeds until the last day of 2008, when he’s 60.
As it turns out, a severe bear market makes it a lousy time to crack open a nest egg; the market plunges 37% that year. Still, our New Year’s Eve baby does awfully well. Despite the turmoil, Ishmael’s stake grows to a bit more than $1.3 million. Today, thanks to the bull market that began in March 2009, the original $3,000 investment is worth more than $3.7 million. And those figures reflect the impact of a stiff frontend sales charge.
Ishmael is fictional, but his investing results are well within the realm of possibility. Professor Jeremy Siegel, of the University of Pennsylvania’s Wharton School, wrote an important book in 1994 titled Stocks for the Long Run. It made the case for long-term stock investing by showing that over lengthy periods, diversified stock portfolios consistently earned substantial profits. That’s still true. Between 1926 and 2016, there have been 72 periods of 20 calendar years (that is, December 31, 1925 to December 31, 1945; December 31, 1926 to December 31, 1946, and so on). Never has Standard & Poor’s 500-stock index or its large-capitalization predecessor recorded a loss over any of those 20-year stretches, and in more than half of them the average annual gain was in double-digit percentages.
Reclusive star. Right about the time Siegel’s book came out, a woman named Anne Scheiber became a legend. Scheiber was a reclusive government lawyer who lived in a studio apartment and subsisted on a salary that never exceeded $3,150 a year. In 1944, at age 50, she pulled together $5,000 and invested it in stocks. She reinvested the dividends but added nothing more, and when she died in 1995, her portfolio was worth $22 million.
Bu hikaye Kiplinger's Personal Finance dergisinin August 2017 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Giriş Yap
Bu hikaye Kiplinger's Personal Finance dergisinin August 2017 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Giriş Yap
FREE HELP FOR COLLEGEBOUND STUDENTS
This program’s mentors assist applicants as they fill out the FAFSA, write essays and more.
WHAT YOU SHOULD KNOW ABOUT SPOUSAL IRAS
You typically need earned income to contribute to an individual retirement account, but a spousal IRA provides an important exception to this rule.
SELLING SHARES? HERE'S HOW TO MINIMIZE TAXES ON YOUR GAINS
ET'S say you've been regularly buying shares in a booming tech company over the past few years, but now you want to start taking some of those profits, perhaps to rebalance your portfolio.
Strategies for Novice Investors
AS part of a lifes kills program for young, single mothers, I was asked to teach a class on how to get on top of your finances.
ANSWERS TO YOUR 529 PLAN QUESTIONS
Thanks to recent policy changes, families have more options for what to do with money sitting in these tax-advantaged accounts.
Rate-Cut Winners and Losers
NOW that the Federal Reserve has cracked the interest rate ice, the next development will be to separate winners from losers.
SHOULD YOU BUY THESE RED-HOT FUNDS?
Covered-call ETFs are popular but come with plenty of caveats.
DIVIDEND STOCKS ARE READY TO REBOUND
Our favorite dividend payers are poised to benefit as falling interest rates lure investors back.
IS A 55+ COMMUNITY RIGHT FOR YOU?
These age-restricted developments appeal to older adults seeking abundant amenities and an active lifestyle.
AT LONG LAST, RATES ARE DROPPING
Consider these portfolio moves now that the Federal Reserve has cut its benchmark interest rate.