The remarkable record of compounded, reinvested stock returns over many decades is the key to successful investing, according to market veteran Charles D. Ellis. In his new book, “Rethinking Investing: A Very Short Guide to Very Long-Term Investing,” Ellis advises investors to focus on the long term, which he defines as 60 years or longer. “The secret to investing, in my view, is time,” Ellis, 87, said in a telephone conversation.
“How much time is there between now, when you invest the money, and when you’re going to spend the money.”
Ellis believes that many people have a 60-year investing horizon, starting in their mid-20s and continuing through their mid-80s or even longer. Understanding the power of compounding means recognizing the exponential growth of investments reinvested over time. Diversified stock index funds have historically produced extraordinary results when investors allow their investments to grow over many decades.
Time is indeed the secret ingredient of investing, offering an avenue to multiply returns through the awesome power of the stock market. Low-cost stock index funds that are diversified are a recommendation from Ellis.
Ellis’s long-term investing strategy
They reduce the risk of picking the wrong individual stocks, and they do as well as the overall market. From January 1926 through March 2025, the annualized return for the S&P 500 was 10.43 percent, according to analysts. That includes several severe market declines over those years, which are overcome with long-term investing.
The cumulative return for the S&P 500 for the past 60 years was an eye-popping 38,881.17 percent. That means an investment of $1,000 60 years ago would be worth $390,000 today. While losses over a one-year period happen 30 percent of the time for all stock portfolios, an investor would have had to hold the S&P 500 for 13 years to withstand all the losses since 1926.
The magic element for financial success is time, not what is happening in the world at any given moment. Ellis’s advice is good for those in their 20s today, but older investors can also think about a 60-year time horizon if they consider investing for their grandchildren.
