The argument for buying stocks is actually quite simple. In the long run, stocks have historically been the best performing asset class among traditional investments. (See Historical Returns.) The figures most commonly referred to are from Ibbotson Associates which maintains statistics on the major investment classes going back to 1926 and publishes Stocks, Bond, Bills, and Inflation annually. Wharton professor
Jeremy J. Siegel went even further having researched investments all the way back to 1802 (documented in his book
Stocks for the Long Run). The bottom line is that historically stocks have returned roughly 10% a year. However, the returns do not come without risk: the 10% is only an average and over any given period of time returns can fluctuate significantly.
There are many web sites that eloquently address the positives of investing in stocks, but the best sites also clearly and effectively spell out the inherent risks and considerations to evaluate. A few good places to start are
The Vanguard Group's The Risks and Returns of Stocks and
The Stock Market Roller Coaster from Frank Russell.
Net Stock Direct is for investors interested in purchasing stock of companies that have programs for selling directly to investors without a broker. They have a complete list of companies (and their phone numbers) with direct purchase plans.
"Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."
Warren Buffett
"Stocks are a safe bet, but only if you stay invested long enough to ride out the corrections."
Peter Lynch, Worth December/January 1997
"If you adhere to the dogma that stocks must beat bonds in the long-enough run, there is no P/E level that the market averages out to at which you will take in sail. A Ponzi bubble is ever possible, and given past psychologies of boom and bust, ever-higher P/E ratios become a self-fulfilling prophecy."
Paul A. Samuelson, "The Long-Term Case for Equities," The Journal of Portfolio Management, Fall 1994.
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