Is 10 years really a long-term horizon for investors?

— -- Q: Is 10 years really a long-term horizon for investors? Investors who thought, 10 years ago, they were long-term investors and assumed they'd be fine have gotten burned by the market.

A: It's practically a cliché. Investment pros constantly tell investors that if they're in the market for the long term, they will be OK despite market volatility.

But you're right. Even patient investors who stayed in the market for the past 10 years aren't feeling so great right now. The Standard & Poor's 500 generated a paltry annual return of 0.4% between Aug. 1, 2000, and August 31, 2011, according to data from

The ramifications of such a lackluster return over such a long portion of time are mind-boggling. Imagine a family that assumed, 10 years ago, that the market would generate a return of between 9% and 10% a year. That family might have assumed it would get a portfolio return, including bonds and cash, of about 4.5% a year, and saved accordingly. That family now is facing a large shortfall in college funds and must either jump-start savings or consider taking out student loans.

The experience of the past 10 years for investors just underscores the unpredictable nature of the stock market, even over a decade's time. While investors can use rules of thumb, like long-term average rates of return, it's important to remember that stock markets aren't like clocks or well-oiled machines. They're random and unpredictable.

This realization is changing the way investors plan for their big financial obligations. When it comes to retirement planning, more advisers are showing investors a range of possible outcomes, even over a long period of time. There's just no way to predict the future, whether that's one, five, 10 or even 30 years from now.

Rather than fixating on the idea of what "long term" really means in investing, you might want to think about what a range of outcomes might be. Going back to the idea of college planning, it's a good idea to consider what your plan might be if the market's returns are disappointing. As a family, you might consider increasing the size of the contributions you make even beyond what the financial models might predict.

When it comes down to it, there's just no way to know what stocks will do over any extended period of time, be that a year, 10 years or even 30 years. As investors, we must acknowledge this. But with that said, if you understand what returns could be, you can plan accordingly and be in a better position than you would be had you not planned at all.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at To submit a question, e-mail Matt at Follow Matt on Twitter at: