Plan Your Prosperity: The Only Retirement Guide You'll Ever Need, Starting Now--Whether You're 22, 52 or 82

Gordon Moore and Endless Innovation

One more thing on this topic before moving on. No one can tell you what stocks, bonds, commodities, anything will do in the long future ahead. That’s part of the feature of taking risk to get return. If returns were certain, returns would likely be lower.

What’s more, it shouldn’t surprise you stocks are likelier to net better returns than bonds in the future—or any other similarly liquid asset class. Or gold or real estate (whose long-term returns have also both badly lagged stocks and likely will in the long-term future).

What is a stock? A stock is a piece of firm ownership. It’s a slice of future earnings—you buy a stock because you expect future earnings will rise. Otherwise, why bother? But more important—stocks adapt. Stocks represent ownership of the collective world of business and the accumulated knowledge and experience of the world. They reflect the relatively constant onslaught of science and technology. When some new technology is created, those who benefit most aren’t those who built the innovation, but those who learn how to use it and market it broadly to humanity—i.e., public stocks.

Bonds are fine! A bond is a promise to return your principal with interest. It’s not a piece of future earnings—it’s just debt. A contract. You could actively trade bonds to increase your expected return—which increases the amount of risk you face (which is fine, as long as you understand what you’re undertaking). They are subject to default and ...