Gekko’s Guide to Prosperity: What Every Shareholder Should Know

PROBABLY the biggest change in the U.S. capital markets during the past decade or two has been their democratization. Nearly everyone is an investor now—and not just in money funds and CDs. The easy availability of mutual funds has meshed in recent years with a long decline in interest rates, prompting many who had never taken investment risk to transfer large sums into stocks and bonds to maximize their yields. The rise of the 401(k) plan, with its varied stock- and bond-fund offerings, has further fueled the trend.

Nor have the new investors been sorry—until recently, at least. The stock market compounded at 15.5 per cent a year between 1980 and 1993, the bond market at more than 11 per cent, and people poured more money in. By 1994 stock funds had ballooned to 21 times their 1981 size. Bond funds were 78 times as large. In the last three years alone, twice as much money has poured into equity mutual funds as was invested in them over their entire 51-year prior history.

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Roger Hertog

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PROBABLY the biggest change in the U.S. capital markets during the past decade or two has been their democratization. Nearly everyone is an investor now—and not just in money funds and CDs. The easy availability of mutual funds has meshed in recent years with a long decline in interest rates, prompting many who had never taken investment risk to transfer large sums into stocks and bonds to maximize their yields. The rise of the 401(k) plan, with its varied stock- and bond-fund offerings, has further fueled the trend.

Nor have the new investors been sorry—until recently, at least. The stock market compounded at 15.5 per cent a year between 1980 and 1993, the bond market at more than 11 per cent, and people poured more money in. By 1994 stock funds had ballooned to 21 times their 1981 size. Bond funds were 78 times as large. In the last three years alone, twice as much money has poured into equity mutual funds as was invested in them over their entire 51-year prior history.