Investments, tenth edition

 Time vs. Risk 

  MANY BEGINNING INVESTORS  eye the stock market with 

a bit of suspicion. They view equity investing as an anx-

ious game of Russian roulette: The longer they stay in, the 

greater their chance of experiencing more losses. In fact, 

history shows that the opposite is true. The easiest way 

to reduce the risk of investing in equities—and improve 

the gain—is to increase the time you hang on to your 

portfolio. 

 See for yourself. The demonstration below uses histori-

cal data from 1950 through 2005 to compare investment 

returns over different lengths of time for small-cap stocks, 

large caps, long-term bonds, and T-bills. 

  

Source: CRSP, Federal Reserve

Time vs. Risk

125%

100%

75%

50%

25%

0%

−25%

−50%

−75%