Couch Potato Paper #1:

Call it the Great Pacifier of Investing. Long term, common stocks produce an average return of just over 10 per cent a year. Better still, the longer you hold your investment, the greater the probability it will provide the long-term average return.

The printed results were shocking. Even though we were investing the same amounts in the same assets and rebalancing the portfolio in the same, consistent 75/25 mix at the end of each year, the long-term results varied wildly. They ranged from a lovely $1,583,230 for the 1969-1998 period to a miserable $458,298 for the unfortunate 1945-1974 period. Thats a spread of more than a million dollars!

Reality Check on Annual Investing

Time Period

Annualized Return

$ By Annualized

$ By Market Return

1945-1974

8.75%

$602,295

$458,298

1955-1984

8.75%

$602,965

$600,644

1952-1981

8.79%

$606,757

$503,000

1946-1975

8.80%

$608,092

$541,920

1927-1956

8.82%

$610,120

$840,651

1937-1966

8.85%

$612,789

$821,461

1956-1984

8.91%

$618,809

$713,278

1931-1960

8.92%

$620,425

$909,864

Tuesday: The difference a year or two can make.