Philip Coggan is the Buttonwood columnist and capital markets editor for The Economist.
Buy stocks for the long term, and you will prosper. But when investors think about the next 40 years, they should consider the lessons of the last 40. It makes an enormous difference when they started to save.
The right time to start saving was in 1982. Bond yields were close to their all-time peak and the Dow Jones Industrial Average was around 1,000, a level it had flirted with in 1965.
The developed world economy was about to enter the “great moderation”, a lengthy period during which inflation fell and recessions were rare. You did not have to be a genius to make money, although many who prospered were awarded that title.
The wrong time to start saving was in 2000. Equities have underperformed government bonds since that date, while central banks have slashed the returns on cash. Workers retiring in 2012 after 30 years of saving will likely have a much smaller pension than those who retired in 1999.Page 1 of 3 | Next Page