Chapter 3. Prelude to Long-Term Wealth—Introduction to the Stock Market
“I don’t know what the seven wonders of the world are, but I do know the eighth: compound interest.” | ||
| --Baron Rothschild[1] | ||
Stocks have provided a ticket to wealth for long-term investors for generations. In fact, between 1926–2006, the value of a stock market investment has returned more than 10%/year, outpacing inflation by 7% annually, on average. Although real estate has been an excellent investment as well, stocks have enjoyed a stronger long-term growth rate historically. Figure 3.1 shows the growth of $1,000 from 1921–2006 in large U.S. company stocks including dividends compared to the growth of home prices and inflation during the same period. (Of course, stock market ...
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