Want spectacular returns on your stocks? Think 60 years or longer

Pioneer of diversified index fund investing believes a very long horizon is crucial

- Jeff Sommer

Forget about the upheaval in the Middle East. Don't dwell on Russia's war with Ukraine, US 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 from the pioneer of diversified index fund investing, Mr Charles D. Ellis, who distilled decades of experience and study into a deliberately simple 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, he advised, think 60 years or longer.

Really? I asked. Who has that kind of investing horizon?

"Actually, many of us have," Mr Ellis 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."

STOCKS VERSUS 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.