They are entitled by law to charge rates sufficient for an adequate return on their invested capital, and this will probably protect their shareholders in the future as it has in the inflations of the past.
All of the above brings us back to our conclusion that the investor has no sound basis for expecting more than an average overall return of, say, 8% on a portfolio of DJIA type common stocks purchased at the late 1971 price level. But even if these expectations should prove to be understated by a substantial amount, the case would not be made for an all stock investment program. If there is one thing guaranteed for the future, it is that the earnings and average annual market value of a stock portfolio will not grow at the uniform rate of 4%, or any other figure. In the memorable words of the elder J. P. Morgan, “They will fluctuate.”* This means, first, that the common stock buyer at today’s prices- 54 The Intelligent Investor
- John Pierpont Morgan was the most powerful financier of the late nineteenth and early twentieth centuries. Because of his vast influence, he was
constantly asked what the stock market would do next. Morgan developed a mercifully short and unfailingly accurate answer: “It will fluctuate.” See Jean Strouse, Morgan: American Financier (Random House, 1999), p. 11.or tomorrow’s-will be running a real risk of having unsatisfactory results therefrom over a period of years. It took 25 years for General Electric (and the DJIA itself) to recover the ground lost in the 1929
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