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Investing in Stocks

; New York Vol. 27, Iss. 3,  (Spring 2020): 44.
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Should you or shouldn't you?

If you had an extra $2,000, would you invest it in the stock market today? Should you? The answer to each question has a lot to do with the history of the person answering the question and the history of the market. According to a 2018 Bankrate survey, 30 percent of millennials favor cash as a long-term investment, while 33 percent of Gen Xers, 38 percent of boomers, and a whopping 44 percent of the silent generation favor stocks. It would seem that age and experience have something to do with investing attitudes. And that makes sense. Millennials have seen a lot of market volatility in their lifetime, including the Great Recession. But older generations, who, as a whole, have invested in stocks over time and watched their money grow despite various economic upheavals, tend to have a different perspective. The history of the market is a compelling case for investing in stocks.

Historical performance

If you're looking at stock market performance, you're looking at numbers. And according to the numbers, equities have historically - and significantly - outperformed other asset classes and inflation. Take the potential growth of a dollar invested in various financial instruments from 1926 to 2017. In that 91-year period, a dollar initially invested in cash investments would be worth $21. That same dollar invested in bonds would be worth $101. If that dollar were invested in large-cap stocks, it would be worth $7,338; and an investment in small-cap stocks would have turned that dollar into $22,997. Think about all the world events during that period: wars, depressions, social upheaval, you name it. Despite many - and sometimes dramatic - downturns, stocks, historically, outperformed over time. This same research showed that the inflation adjusted value of that 1926 dollar would be...