Forget about the upheaval in the Middle East. Don’t dwell on Russia’s war with Ukraine, U.S. tariffs and the budget deficit — or just about anything else that has been dominating news coverage and threatening to undermine the markets.
These issues are critical right now, undeniably. But history suggests that they will be irrelevant in your investing life, if your horizon is long enough.
Instead, focus on just one thing: the remarkable record of compounded, reinvested stock returns over many decades. That’s the message of Charles D. Ellis, a pioneer of diversified index fund investing, who has distilled decades of experience and study into a deliberately simple new book, published in February by Wiley: “Rethinking Investing: A Very Short Guide to Very Long-Term Investing.”
“The secret to investing, in my view, is time,” Mr. Ellis, 87, told me in a telephone conversation. “How much time is there between now, when you invest the money, and when you’re going to spend the money. By ‘long term,’ most people think six months, maybe a year, maybe even a few years.”
I’ve said in many columns that, based on history, a long-term investor needed to stay in the stock market for at least a decade, and preferably longer, to have a high probability of an excellent return. Mr. Ellis said that’s still too short to enjoy all the benefits of long-term investing. Instead, Mr. Ellis advised, think 60 years — or longer.
Really, I asked? Who has that kind of investing horizon?
“Actually, many of us have do,” he said. “Say you start in your mid-20s and you continue through your mid-80s. And then, if you’re lucky, you can go longer than that.”
He acknowledged that he has been lucky — well-educated, healthy, still working and with enough ready money to pay the bills throughout his life, allowing him to sock away investments in the stock market, despite its ups and downs.
But at his age, I said, surely, his investing horizon has become much shorter than 60 years.
“Not really,” he said. Obviously, now that he is in his late 80s, his life expectancy isn’t what it once was. “But if you ask me, who am I investing for today, it’s for my grandsons and granddaughters,” he said. “They’ve got a long time ahead of them.”
Stocks vs. Bonds
Sequestering your money in a stock index fund and keeping it there for at least six decades is a great idea, but it’s a luxury that many people can’t afford.
While I fundamentally agree with the wisdom of holding diversified stock index funds for the long run, I also think it makes sense for people to take care of their immediate and foreseeable needs first. Just paying your bills on time can be a challenge. If you can do that and have accumulated some savings, putting aside enough cash to meet your short-term needs and emergencies is a good move.
I’d keep some of that money in interest-bearing securities — like money market funds and Treasury bills. In addition, for the money you know you will need to spend within five or 10 years, a mix of cash and investment-grade bonds seems sensible to me. If your life expectancy were fairly short and you were not investing for anyone else, it would be unwise to put all of your money in the stock market.
Mr. Ellis said he had no problem with any of those ideas. But, he said, “for the money you are putting aside for retirement or other long-term goals, I’d put all of that in stock.”
Here, we didn’t entirely agree.
Personally, I’ve always kept some money in investment-grade bonds purely for safety. That’s largely because as a newspaperman my entire working life, I’ve known both that I’ve been fortunate to remain employed and that I would never generate enough surplus income to be comfortable with losing a big chunk of my savings in a short-term decline in the stock market.
Furthermore, if you’ve never invested in stocks and you’re, say, 65, Mr. Ellis said, switching abruptly to “no bonds, just stocks” would probably entail too much additional volatility for most people to bear.
But in general, for the money you can afford to invest for the long haul, he said, use low-cost, diversified stock index funds. They reduce the risk of picking the wrong individual stocks and they will ensure that you do as well as the overall market does.
Lessons From History
I checked the stock market’s historical performance numbers with Howard Silverblatt, senior index analyst for S&P Dow Jones Indices. From January 1926 through March 2025, he reported, the annualized total return for the S&P 500 was 10.43 percent. There were many severe market declines over that long period, but the gains far outweighed them.
Because Mr. Ellis likes to think in 60-year increments, I asked Mr. Silverblatt to compute the S&P’s annualized return, with reinvested dividends, over the last 60 years. It was almost the same: 10.46 annualized through June 20. Now, consider what that means: Your investment would have doubled in less than seven years, on average (despite big losses in some years). That repeated doubling amounts to exponential growth, with the absolute returns increasing with every positive decade.
Consider that the cumulative return for the S&P 500 for those 60 years was 38,881.17 percent. That’s not a typo. It means that $1,000 invested 60 years ago would be worth about $390,000 today. The possibility of achieving extraordinary compound returns like those makes long-term diversified investing through stock index funds a no-brainer, in Mr. Ellis’s view.
Sixty years ago, stock index funds weren’t widely available. But Jack Bogle, the founder of Vanguard, changed that in 1976, and index funds for stocks and bonds — as well as for cryptocurrency and, seemingly, everything else that can be bought or sold in public markets — are now readily available to anyone with the money to make an investment.
That said, stock investing requires courage. As I’ve pointed out many times, the stock market frequently declines over shorter periods. Morningstar Direct, a unit of the independent financial services company Morningstar, examined stock and bond performance in every calendar year from 1926 through 2024 at my request. You needed to have held the S&P 500 for at least 15 calendar years to have avoided any losses during that long period. On the other hand, if you owned Treasury bonds as well as stock, you would have avoided losses if you had held your investments for at least a decade.
Over one-year periods, losses were common: They happened 30 percent of the time for all-stock portfolios, and 18 percent of the time if 60 percent of your portfolio contained bonds.
In a nutshell, that’s why I hold bonds and cash, as well as stock, at all times. While I expect the stock market to continue to outperform other assets over the long run, I’m not entirely confident that it will do so just before I need to spend my money.
Moreover, the past may not predict the future. Don’t ignore the news entirely: It’s clear that the world is changing rapidly right now. So I’m hedging my bets. I’m a global investor, not just a U.S.-focused one.
For his part, Mr. Ellis favors the U.S. stock market and believes that the ability of U.S. companies to generate hefty profits — some derived from foreign operations — will continue for decades to come. Stick it out for the long run — the very long run, he says.
It’s not easy to do. There will be trouble ahead. But with luck, he says, you will see your money double, and double again and again.
“It’s hard for people to believe if they haven’t gone through the math,” he said. But until now, anyone who has held diversified stocks for a long time has experienced spectacular gains. Stick with the stock market for decades, he said, because that’s “where the sweet, sweet, sweet stuff comes through.”
Jeff Sommer writes Strategies, a weekly column on markets, finance and the economy.
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