The Savage Truth on Money, 2nd Edition

CHAPTER 5

THE SAVAGE TRUTH ON THE STOCK MARKET

It’s Less Risky Than You Think

The first edition of The Savage Truth was published shortly before the stock market crash of 2001, and this chapter originally revolved around a warning that stocks don’t go straight up! Well, we’ve all learned the truth of that warning in the intervening decade. Today, many people have gone to the opposite extreme—swearing off stocks after watching their hard-earned contributions to a retirement plan go down the drain in a bear market.

I intend to make the argument that if you believe in the future of America—the country where you intend to live, work, retire, and hope to watch your children and grandchildren grow up—then you must invest sensibly in the stock market for the long run. Even in the face of your current skepticism, the case for stock market investing is persuasive.

But one basic question has arisen in recent years that must be addressed first. It’s the issue of whether the stock market is “fair.” There’s a growing feeling on the part of individual investors that the deck is stacked against them. Headline scams like Madoff, the revelations about Wall Street firms acting against the interests of their clients, and the investigations into insider trading on the part of hedge fund managers have combined to cast strong doubt on the fairness of the markets.

No one wants to play a game that is rigged against you. When even the top government investigators fail to find the scams that are going ...