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<p>It is fortunate that it worked out for you, but there certainly were no guarantees that “the magic of compounding” will work out for everyone.</p>
<p>Parents who put invested money in a stock-market-based college fund starting with the birth of a child in 1964 (the first time the Dow hit 1,000) would have found 17 years later that their investment had not even kept up with the general rate of overall inflation, let alone the rate of college tuition inflation during that period!</p>
<p>The mid to late 60s and the 70s were a time when there weren’t many available investments that would yield a positive return after adjusting for taxes and overall inflation. (Owner-occupied housing in some areas was, in retrospect, one of the few investments that might have had a positive compounded rate of return after taxes and inflation injustment.)</p>
<p>Of course, in more recent years, investing in owner-occupied housing has not been a good deal–and the stock market has soared (and the tax treatment of income from stocks has gotten much more generous lately as well.)</p>
<p>Things could very well change in the coming decades. We could find that the next few decades are times when the stock market stagnates and maybe after the housing bubble fully deflates, real estate may become a good investment again in the future. Who knows. A lot depends on the whims of politicians and world events that affect everything from tax policy to market psychology.</p>
<p>If only we all had crystal balls!</p>