A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

by Burton G. Malkiel

On average, investments over all twenty-five-year periods covered by this figure have produced a rate of return of slightly more than 10 percent. This long-run expected rate of return was reduced by less than 3 percentage points if you happened to invest during the worst twenty-five-year period since 1950. It is this fundamental truth that makes a life-cycle view of investing so important. The longer the time period over which you can hold on to your investments, the greater should be the share of common stocks in your portfolio. In general, you are reasonably sure of earning the generous rates of return available from common stocks only if you can hold them for relatively long periods of time.