For Long-Term Investors, the Focus Should Be on Risk
by Paula Hogan and Zvi Bodie
There is a common notion that stocks, at least if held for a long-time, usually outperform other assets, so that stocks should be the cornerstone of any long-term portfolio.
If, when this idea is presented, you protest: “Wait a minute. Stocks are also risky!" the reply is either, "Stocks have done well in the past and so they will probably also do well in the future," or "If you have a long time horizon, you'll do well in stocks."
However, the thoughtful investor must also wonder: “But what if stocks don’t do well? What happens then to my retirement?”
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Zvi Bodie , Ph.D., is a professor of finance and economics at Boston University School of Management. He maintains a website at www.zvibodie.com..