But as the market sputters and struggles to maintain altitude, now is a good time for both investors and policymakers to consider how many of our eggs we want to put in this basket. This is not a thought that either the public or its leaders will rush to embrace. The magic box has made too many things too easy. Even President Bush's tax-cut proposal is riding in part on the market, as revenues from capital gains and stock options have done their part to turn the seemingly endless federal budget deficit into a seemingly endless surplus. The answer, of course, is risk.
Few economists dispute the notion that investing in stocks is a good idea in the long run.
The U.S. economy has historically been a strong one, and the market has reflected that strength. But that's not the same thing as saying stocks are without risk. The market's history is not a chart with an unbroken upward line. The 1970s were tough on investors, and it's no mystery why creators of the Social Security system in the 1930s put its funds into government bonds and not stocks. The shift of so many elements of the so-called social safety net into vehicles related to stocks thus holds important perils.