Stock markets always rise over the long term

THIS is the 10th instalment of our retirement series. In my previous writings, I shared how I used our proprietary tool "RetireWell" to give our client David (age 59), a reliable income stream throughout his retiring years. I also shared about how in holistic retirement planning, it is not just about having enough wealth, but also having a purpose-driven retirement life. (You can read the unedited version of the earlier articles at www.providend.com/articles/).

I have also written in part 7 of this series, about how if retirees stay invested in a broadly diversified portfolio of stocks over the long term (more than 10 years), their portfolio will grow because stock markets always rise in the long run. I have shown the data supporting this in part 7 of this series. But why do stock markets always rise in the long run?

When we invest in the stock markets, we must know that we are investing in real businesses. Fundamentally speaking, it is ultimately the earnings of these businesses that drive stock prices. And as long as there is a growing demand for goods and services, these businesses as a whole will continue to grow in their earnings. But what will cause demand to increase? The answer is population growth and rising standard of living.