Long-Term Stock Investments Should Last Three Decades

Abstract

Claims that the stock market is an investment for the long term are common, details on how long it takes less so, and empirical justifications are downright rare. In order to avoid losing purchasing power on one’s stock investment, it must last two decades (with regular investments, it takes around half a dozen more years). The uncertainty of returns decreases for stock investments up to three to three and a half decades, before hitting a 15-year long plateau. Reaching three decades thus reduces the part played by chance (when one happens to be born), but waiting for five decades shows less further improvement.

Keywords: long-run investment, fiite-term investment, investment time horizon, bear markets, regular investments

JEL Classification: C10, G10, N20