When New York magazine was swallowed up by Rupert Murdoch in early 1977, I joined a bunch of other writers, retrieved my few thousand dollars in pension money, and left. Knowing that the money would have to find a home under the shelter of an IRA or else be subject to taxation, I stuck it into Mutual Shares, a fund run by Max Heine and his young protégé Michael Price.

I was reminded of this recently when I got my latest statement. According to Morningstar, Price has compounded the value of that fund at the rate of 19.6% for the last 21 years. A dollar invested 21 years ago under the shelter of an IRA is now, therefore, nearly $43. My little stake (which had had the benefit of only 20 years’ compounding, not 21) is now a six-figure stake.

They say that “past performance is no guarantee of future results,” and I know this to be true for two reasons. (Fuzzy reasons, but valid I’m quite sure.) In the first place, the last 21 years in the stock market have been extraordinary. It can’t keep up like this. Second, if Mutual Shares did continue to compound at that rate, then 21 years from now, when I’d be forced to begin withdrawing from it, each dollar originally invested in my IRA would have grown to $1,839.

Lovely, no? But barring major inflation — which would at first knock stock prices on their bottoms but ultimately drive them higher to reflect inflated values — it just doesn’t make sense that this would happen.

One could parse all this in much finer detail (noting, for example, that Price recently sold out to the Franklin Group of funds, so that, for newcomers, Mutual Shares is now a “load” fund, and its not likely to enjoy Price’s management for anything like another 21 years). But instead I’d just like to point out two very general and somewhat contradictory “themes.”

First, one really should not expect nearly as much from the market in the next decade as in the last. Second, starting early with an IRA — or any form of saving — really does make sense. Twenty years will pass, and then forty, and if you’ve been socking away your $2,000 a year in an IRA ($4,000 now for you and a nonworking spouse), you will be SO happy you did.

Kids: are you listening?

 

 

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