I’ve posted Entry #46 to my weekly Investing: The New Rules column at the Death by 1,000 Papercuts site. It’s called When It Comes to Investing Advice, Word Games Kill.
Juicy Excerpt: Outright lies would not fool you. If a stock expert said “stocks are guaranteed to go up 20 percent next year,” you would laugh at him. But what if he said — “Stocks are always best for the long run”? Millions of smart people fell for that one. That claim hurt a lot more people than silly guarantees of 20 percent annual gains ever could.
Is it true that stocks are always best in the long run? In a hyper-technical sense, this is so. People who bought stocks at the prices at which they were selling in 2000 were almost certainly going to see very poor returns for 10 years and 15 years and possibly even for 20 years and 25 years. But after the passage of 30 years, they were almost sure to see a good return on their money.
Whether this one is true or not depends entirely on how you define the phrase “the long term.” If you listen closely, you will note that the people making the claim never say how long you have to wait to get to “the long term.” The claim that stocks are always best for the long run is a dangerous word-game claim.