Mary Ray recently died, a few months shy of her 115th birthday. Daisey Bailey, 113, died the same day. Their long lives offer a great chance to see how powerfully money can grow.
Conventional wisdom holds that investors should shift their nest egg from stocks into safer, more stable bonds as they age. For most of us, with a retirement horizon that likely extends no more than 30 years into the future, that may sound like a sensible strategy. But if you end up enjoying 50 more years of life -- or more! -- keeping at least a good-sized chunk of your savings in stocks could generate serious growth.
If Ray or Bailey had parked $1,000 in any of these well-known blue-chip dividend payers only 40 years ago, they could have enjoyed amazing returns:
|
Company |
40-Year Average Annual Return |
$1,000 Would Have Grown To: |
|---|---|---|
|
Altria (NYSE: MO) |
18.9% |
$1,016,900 |
|
McDonald's |
15.3% |
$297,300 |
|
ExxonMobil (NYSE: XOM) |
15.1% |
$277,340 |
|
Boeing (NYSE: BA) |
14.8% |
$249,900 |
|
Disney (NYSE: DIS) |
10.9% |
$62,700 |
Data: Yahoo! Finance.
Sure, returns vary widely by stock, and yes, some stocks won't even last 40 years. But many will, and those that do will most likely reward long-term shareholders well. A modest $1,000 investment in Altria (then Philip Morris) would have grown to more than a million dollars in 40 years. DuPont (NYSE: DD) and Caterpillar (NYSE: CAT) proved less spectacular over the past 40 years, but even they averaged about 9%, turning $1,000 into almost $40,000.
Even companies that fall on hard times, as General Electric (NYSE: GE) did recently, can still turn in strong long-term performances. General Electric has averaged about 11.6% over the past 40 years -- enough to turn $1,000 into $80,000. And it was a familiar, easy-to-think-of stock even 40 years ago.
Lessons galore
Obviously, you can do spectacularly well investing for the long term. That's good news, since it's increasingly likely that you might see a ripe old age. For those born in 1980, their odds of reaching 100 are 87 to 1 -- perhaps not great, but definitely an improvement from 400 to 1 back in 1899.
Though you might be 55, and only 10 years away from retiring at 65, some of your money might remain invested for another 40 or 50 years. Be sure to invest it well -- whether in a broad-market stock index fund, or outstanding funds, or carefully chosen individual stocks. Spread it across a bunch of stocks, follow them regularly, and keep your eye on the distant horizon. You never know how long you might live.
