Anthony and Robyn Pryor have developed a basic household budget, so putting money aside for their future is important to them. “Investing has been a top priority,” says Anthony, 32, an environmental consultant who lives in Fort Washington, Maryland. “I consider the money we use to fund our IRAs and our baby daughter’s college fund somewhat sacred. That’s part of our monthly non-negotiable overhead, along with rent, food, and utilities.”
Anthony and Robyn, 27, a flight attendant in the Air Force, make monthly contributions to these accounts as well as regular taxable accounts. Their diligence has paid off. Their mutual funds were up in the 14% to 18% range last year, notes their financial adviser, Richard J. Peace, a certified financial planner with FSC Securities Corp. in Colorado Springs, Colorado. “The discipline that Anthony and Robyn have shown over the past few years has helped them during a time when others have been reluctant to make such a commitment.”
While large numbers of skittish investors abandoned the stock market in recent years, the Pryors have been bullish. They placed 95% of their $80,000 in holdings in equity funds that include American Funds EuroPacific Growth Fund (AEPGX), American Funds Fundamental Investors Fund (ANCFX), American Funds International Growth and Income Fund (IGAAX), American Funds Global Growth Portfolio (PGGAX), and American Funds Growth and Income Portfolio (GAIOX).
Many investors are still shell-shocked after the stock market crash and economic downturn of late 2008 to 2009. Brave souls like the Pryors, who stuck with stocks, have been amply rewarded. In March 2013, the benchmark Standard & Poor’s 500 Index was around 1,550, up more than 125% from its low four years earlier. The Dow Jones industrial average was at a record high, well above 14,000, validating the courage of investors who stayed in the market despite days such as the one that produced a 216-point loss in early February.
Bouncing back, in fact, is something that stocks have been doing for decades. Even before the bear markets of the 21st century, the U.S. stock market has endured a lot—world wars, numerous recessions, and innumerable crises—and still delivered solid returns. According to Morningstar, large-company U.S. stocks have produced annualized returns of nearly 11% for the past 30 years, through 2012. Going back to 1926, to include the Great Depression, annualized returns are around 10%.
“Over the long run, stocks have outperformed every other investment,” says John W. Rogers Jr., chairman, CEO, and chief investment officer of Chicago-based Ariel Investments (No. 7 on the BE Asset Managers list with $4.4 billion in assets under management). “As Warren Buffett has said, ‘The capitalist democracy in which we live today is the best system ever invented.’ A resilient economy is likely to produce increasing profits for corporations and higher share prices for investors.”
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