How Different Generations Think About Investing

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10. Nobody thinks it's a "sure thing" who knows anything about it.

It's just that over the past 100+ years, equities have performed better than bonds and cash equivalents (CD's, money market, Treasury bills, etc.)

The reason - earnings drive the market. This from Peter Lynch in 2001:

Since World War II, despite nine recessions and many other economic setbacks, corporate earnings are up 63 fold and the stock market is up 71 fold. Corporate profits per share have grown over 9% annually despite the down years. Nine percent may not sound like a lot but consider that it means that profits mathematically double every 8 years, quadruple every 16, are up 16 fold every 32 years, and are up 64 fold every 48 years."

As far as the "big guys" and the "little suckers", corporate earnings (profits) have been an ever-increasing share of GDP, while wages and benefits for the workers have been a declining share.

As for risk, the risk of running out of money in a long retirement is much greater in portfolios that are mostly in bonds or other fixed income than for portfolios that are mostly equities.

As for why we consider equities an investment and not "a casino", is the vast long-term performance superiority of equities over bonds or other fixed income investments.

For example, since its August 31, 1976 inception, the Vanguard S&P 500 index fund (VFINX) with dividends reinvested and after expenses, has returned 11.03%/year on average (through July 29, 2019). It has increased 89.075 fold during this 42.908 year period (1.1103^42.908 = 89.075). ON AVERAGE, it has doubled every 6.6 years. On average.
https://www.thestreet.com/quote/VFINX.html

This page dramatically shows the difference between the performance of the S&P 500 vs. 3 month T Bills and 10 year T Bonds.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

As one example, $100 invested at the beginning of 1928 compounded to $382,850 when invested in S&P 500. This despite being pummeled by the 1929 crash, the Great Depression, the 1974-75 crash, the Reagan double-dip recession, the 1987 crash, the dot-com crash, and the housing bubble crash.

If instead it was invested in 3 month T bills it would have only compounded to $2,063. And if invested it 10 year T bonds, it would have compounded to only $7,308.

I have more on the subject of why equities here:

https://www.democraticunderground.com/?com=view_post&forum=1014&pid=2212402
https://www.democraticunderground.com/?com=view_post&forum=1121&pid=1306

In my early investing years in the mid-1980s thru the 1990s, I was mostly in bonds and CDs (which were in the double digit yields in the beginning of the period and in high single digit yields in most of the 1990s). Fortunately, I did have about 25% in equities and that did considerably better than the fixed income stuff.

During the 1980s and 1990s, I used to squawk and holler about national and world events and oh God, the market is going to crash and its rigged and blah blah blah. And whenever the market dipped, I was a "see I told you so" type of idiot. And whenever it went up, I was a "it's a bubble" type of idiot. Meanwhile I noticed that my parents were nonchalant about market dips and just plugged away with a wide range of equity investments (mostly).

I was also fortunate enough to be a member of AAII (the American Association of Individual Investors), and eventually began to read more and more articles from the AAII Journal, and that was my primary way that I learned to invest, and to spend less time gnashing my teeth and wringing my hands. Consequently, I fortunately held on to my equities through both the dot com crash and the housing bubble crashes.

I hope you will consider putting at least 25% into equities. Whatever you decide, I wish you the best.

EDITED - I updated the Vanguard VFINX example through 7/29/2019.