NEW YORK -- In the midst of a mighty bull market, one of the biggest challenges facing any mutual-fund investor is to resist complacency.
There are plenty of prudent commentators who keep warning against the dangers of an everything-is-fine-and-always-will-be mentality as you decide where to put your savings.
Your ears hear these admonitions, but cautionary words can't make much of a lasting impression when they diverge so drastically from the experience people have been having for so long.
At the halfway point of 1999, most stock funds are on track to post their fifth consecutive year of two-digit gains. Over the past 15 years, according to calculations by Lipper Inc., the average stock fund has climbed at a rate of 15 percent a year.
Even as you tell yourself that this kind of thing can't continue forever, a rising market takes on the appearance of normal routine. Ah well, you may conjecture, maybe the bull market will slow down and everybody will have to "settle" for 8 percent or 10 percent returns.
That doesn't begin to cover all the possible outcomes. No matter what the past record and the present picture look like, and no matter what some expert or computer model predicts, the future for investments like stocks is always uncertain and unpredictable.
For a glimpse of the complacency that threatens every investor, take a look at the results of a survey of 700 investors nearing or just starting retirement, which was commissioned by the Forum For Investor Advice, an association of fund groups sold primarily through brokers.
Only about one in 10 of the respondents said they were very worried about outliving their assets, a sharp decline in the stock market, a major increase in inflation, or trouble affording the cost of a good nursing home.
"The fact that only 11 percent of recent retirees that we surveyed are seriously concerned about outliving their financial resources, and only 8 percent are concerned about a bear market in stocks, is really very surprising," said Barbara Levin, the organization's executive director.
"I can only assume that, despite the numerous warnings about the cost of a comfortable retirement, the unprecedented bull market in stocks and the excellent economy we have been experiencing has lulled them into a false sense of security."
The point of all this is not to spread gloom, but to encourage looking at things realistically. There is every reason to hope that prosperity will continue to flourish on both Wall Street and Main Street for a long time to come.
To plan well for your future, it makes sense to consider other what-ifs. In your study of a mutual fund, let's suppose you are looking at a graph that shows how much a hypothetical $10,000 investment in 1970 would have grown to today.
This illustration, known in the industry as a "mountain" chart, may look very impressive, and serve as a kind of advertisement for the idea of long-term investing, but it is of only limited value in planning for the future.
You can't buy a single dollar of that past performance. It has come and gone forever. You certainly don't want to base the planning for your financial future on the assumption that the exact same results will accrue in the next 10, or 20, or 30 years.
If you are making financial projections based on an assumed rate of return from your investments, don't just plug in 10 percent or 15 percent for stocks and let it go at that. Run the same exercise using 5 percent, and maybe even 0 percent or a negative number.
Can such a thing really happen? Unlikely as it may seem today, recall that after the Dow Jones industrial average reached 1,000 for the first time in the booming 1960s, it spent 14 years struggling to rise past that point.
Also, whatever average annual return awaits you, consider that you will probably have to ride out some shocks along the way. People who bought stocks or stock funds for the long haul in late summer 1987 were making what turned out to be a very sound investment.
Before they could see any payoff, they had to ride out a drop of 30 percent to 40 percent in the October crash of that year.