This is a question I get asked a lot, especially whenever there is volatility like there is right now. While I don’t know what’s going to happen today, or next week, or even next year, I can tell you that investing in stocks has proven to be the best way to beat inflation and grow your liquid assets.
Below is a chart of the Dow Jones Industrial Average, alongside the S&P 500, for the last 40 years. It is presented in logarithmic scale as that is the best way to show the rate of growth over time, which is what we care about when looking at long-term change (growth) in the stock market.
Note the upward trend throughout the 1980’s despite high interest rates and the oil/real estate bust, tarnished only by the crash of 1987. Next, look at the steep slope in the late 1990’s, which was the “irrational exuberance” that finally came to a halt in early 2000. This was followed by a few years of declines and stagnancy in the stock market, then the great recession hit. Following that, we’ve seen a nice, gentle trajectory, briefly interrupted by the Covid dip in 2020. All in all, though, it’s been a steady upward trend, averaging over 9% per year.
I show this to you to answer the question at the top of this article. The answer is: up! While this chart is for 40 years, I could go back 60 years or even 90 years and the answer is the same: lots of ups and downs, but overall a gently upward trending slope. No matter what’s going on in the world, good companies find a way to survive and profit. For this reason, your long-term money should be invested in assets that carry some risk, as without risk, there can be no reward.