Experts Say Long-Term Stock Investment Still A Good Idea

September 25, 2000

Many fear that while today's stock market returns have been healthy, future returns will decline as the Baby Boomers sell off assets to pay for retirement and a smaller workforce is available to buy them. But two experts declare these dangers to be exaggerated. James Poterba, professor of economics at the Massachusetts Institute of Technology, told a recent conference that "Older households are often net savers,’’ meaning that they would add to their investment portfolios even in retirement. Moreover, the global nature of U.S. stock markets means that many workers living in foreign countries would buy U.S. stocks: "I could live happily unloading my retirement savings to somebody with a wireless telephone in a hamlet in China," Poterba said.

Likewise, famed market expert Roger Ibbotson of Yale University forecasts the Dow will rise to 110,000 by 2025. Ibbotson predicted in 1974, when the Dow stood at 851, that the index would reach 10,000 by 1999, which it did. While saying that his 2025 forecast was ‘‘just a probability -- it’s not guaranteed,” Ibbotson remained convinced that “Over the long run stocks will out perform money markets or bonds.” Ibbotson points out 2025 isn’t that far away when it comes to planning for retirement. “That’s you -- that’s your planning -- 25 years. It’s as good to start now as anytime. The next 25 years is going to be a lot like the last 25 years.”

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