Hi, I've been lurking on these boards for a while, and I've learned a lot. I realize that a forum dedicated to short-term investing may not be the best for my question (which deals with the long-term), but I don't know where else I can ask as many intelligent people. Popular opinion holds that the major stock markets make for good long term investments. Everyone talks about how they have historically returned more than 10% per year, and they assume that this long-term trend will continue. I am not yet very knowledgable about stocks, so there is almost certainly a flaw with the following reasoning. My challenge to you is to point out the flaw! It seems to me that it is impossible for the stock market to continue outpacing inflation forever. Why? Well, to make the math simple, let's set the inflation rate to 0 and suppose that stocks return 10%. Let's also make another simplifying assumption that doesn't have any effect on my main point: The only holders of money are individuals, and the only corporations are publicly traded. In other words, private companies, governments, and other types of organizations do not exist. Got it? Good. Now, suppose that there is $1 billion in our sample economy. Since inflation is 0, this number remains constant forever. Let's say that, in the beginning, the combined market cap of all of the corporations is $100 million. Alright. No problems there, right? Let's fast forward 10 years. The stock market has been increasing in value by 10% every year, so now the stocks have a total value of about $260 million. Still no problems. OK. Let's fast forward 100 years from the starting point! Uh oh. Now all of the stock is worth $1378 billion. This is a problem, since only $1 billion in actual money and/or purchasing power exists. Several corporations would be worth more than the combined net worth of all of the people in the world! I cannot imagine that any company could truly produce enough value to justify being worth several times more than the net worth of the world.