Why Stocks Are a Bargain

Over the long term, which are less risky for the reward they offer -- stocks or bonds?

As night follows day, when the stock market rises, I get phone calls from reporters who want me to talk about the book I coauthored in 1999, Dow 36,000. Just as inevitably, these reporters have not read the book and haven't the foggiest idea what it's about. What they want to know is the precise date that the Dow will hit 36,000, which I don't know now and never claimed I did. But let's dispose of this question as we get on to more important matters.

Assume the future is like the past 80 years and the Dow produces the market's historical rate of return of a little more than 10% annually, including dividends. Also assume that dividend growth will remain at 2%, so the net price rise in the Dow will be 8%. As I write, the Dow is roughly 12,600. At an 8% growth rate, it will hit 36,000 on approximately February 14, 2021. Celebrate with your Valentine.

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James K. Glassman
Contributing Columnist, Kiplinger's Personal Finance
James K. Glassman is a visiting fellow at the American Enterprise Institute. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence.