Answer: No one knows what the future will bring. But we’ve been through tumultuous times in the stock market many times in the past. Between the mid-1960s and early 1980s, for example, the Dow Jones industrial average benchmark of stock prices pretty much went nowhere, pinging back and forth between about 600 and 1,000. (Just do a Web search for “Dow Jones history” and you’ll turn up charts that show this.) People were pretty disgusted with stock market returns, and many were pessimistic about the future of our economy. Through the rest of the 1980s and ’90s, though, stock market returns exploded.

In every 30-year period since 1928, stocks have had an average annual return of at least 8%. Those who hung on through bad times were eventually rewarded for ignoring the doom-and-gloomers.

Answer: The most important thing you need to know about investing is that there is no such thing as a truly risk-free investment.

You won’t lose your principal if you invest in “safe” investments, such as Treasuries and FDIC-insured bank accounts. But you won’t earn enough to keep ahead of inflation. Basically, you’ll never be able to save enough to retire, since the purchasing power of your funds will erode over time rather than grow.

To stay ahead of inflation, you need to take more risk. Stocks over time have consistently offered returns that beat inflation. In every 30-year period starting in 1928, stocks have returned average annual returns of at least 8%. But they certainly don’t gain that much every year, and some years you’ll face steep losses. When you invest in stocks, you have to be prepared for volatility. In other words, sometimes your investments will lose money.

You can reduce that volatility somewhat by diversifying your stock investments (some small companies, some large; some U.S. companies, some foreign) and by including a diversified mix of bonds in your portfolio, along with cash.

A fee-only financial planner can help you design an investment plan that makes sense for your situation. Or you can consider opting for the “lifestyle” or “target date retirement” funds offered by your plan, since they do the diversification and rebalancing for you.

Answer: Remember the Depression? World Wars I and II? The Cold War? The assassination of President Kennedy? Vietnam? Watergate?

Probably not, because you weren’t around. Regardless of the setbacks we’ve faced, however, our economy — and stocks — continue to grow.

Investing in stocks is essentially investing in the productivity of our companies. If you want a graphic representation of that growth, use a search engine to find a chart showing “Dow Jones historical average.” You’ll see that this market benchmark has had numerous setbacks, many of them serious, but its growth has been exponential. The Dow started 1932 at 100, for example; in the 1970s, it bobbed around 1,000; it started this year well over 11,000.

Yes, there will be scams and scandals and people gaming the system. The fact remains that no other investment has the inflation-beating history or potential that stocks have. If you hope to retire someday, a good portion of your portfolio likely needs to be in stocks.

As for gold, here’s another little bit of history you should know. Although it’s been on a tear lately, the price of gold still hasn’t returned to the peak in value it enjoyed in 1980, once you adjust for inflation.

Answer: Financial planners recommend retirees keep a portion of their portfolios in stocks or stock mutual funds to offset the erosion of buying power that comes with inflation. Portfolios with some exposure to stocks are less likely to “fail”—be depleted before the client’s death—than those that are entirely invested in bonds and cash. The recommended percentage of stocks can vary depending on the advisor and the client, but often ranges from 20% to 50%.

Some planners like to make sure their clients have cash equivalent to two years’ worth of expenses and short-term bonds equal to three years’ expenses, to avoid the necessity of having to sell stocks during a downturn. But your portfolio’s proper asset allocation depends on a number of factors, including your other sources of income. If your living expenses are covered by Social Security and pensions, for example, you may be able to tolerate a higher exposure to stocks.

All this is worth discussing with a fee-only financial planner who can take a look at your financial situation and give you individualized advice. You can get referrals at Garrett Planning Network (www.garrettplanningnetwork.com) and the National Association of Personal Financial Advisors (www.napfa.org).

If I can ever figure out how to get PDFs into WordPress, I’ll post the whole chart, which shows the average annualized returns for every 30-year period starting in 1926.

What it shows is that if you held stocks for 30 years, you not only wouldn’t have lost money, but you would have seen at least an 8% average annualized return.

Some interesting numbers:

• The best 30-year period: 1974-2004, when the S&P 500 averaged a 13.7% average annual return
• The best 30-year period, adjusted for inflation: 1932-1961, where the real return averaged 10.6%
• The worst 30-year period: 1929-1958, when the S&P averaged 8.5%
• The worst 30-year period, adjusted for inflation: 1965-1994, where the real return was just 4.4% (although the nominal return was 10%)
• The percent of 30-year periods where S&P 500 returns exceeded 10%: 81.5%
• The percent of 30-year periods where the return was greater than zero: 100%

The take-away? If you’ve got 30 years until retirement, you’ve got plenty of time to recoup your losses and profit from today’s low prices. If you’re closer than that, I’d recommend a session with a fee-only financial planner to make sure you have enough stock exposure to capture the gains sure to come along with bonds and cash to cushion any downdrafts.

Answer: It’s not as easy as you might think.

Children under 18 generally are not allowed to own investments in their own names. As a result, you must decide first how to hold the shares: in a custodial account, in a joint account with them or in your own account.

Keeping them in your own name may be the best option if you’re concerned about future college financial aid, because the other two choices could count heavily against them in the federal aid formulas.

You also have many alternatives when it comes to buying the shares  always with a variety of fees, charges and options to watch.

You can buy your shares through a brokerage, but you may face commissions, minimum account balance requirements and account fees.

If this is a one-shot investment or you’re able to commit only small amounts of money at a time, a better option might be ShareBuilder Corp., a low-cost online broker, which has no minimum balance requirements or account fees.

ShareBuilder charges $15.95 for single trades or as little as $1 per trade in its automatic investing program.

You also might consider buying directly from the company that issues the shares.

Hundreds of companies  including many your kids would know, such as Coca-Cola Co., Mattel Inc., McDonald’s Corp. and Sony Corp.  sell shares directly to investors. Again, minimum purchase requirements, account fees and commissions may apply.

DirectInvesting.com, a website that provides direct investment enrollment services for hundreds of companies, can get you started.

All these options are electronic, so you won’t get a stock certificate you can wrap for holiday gift giving. If that’s what you’re after, you might check out the options at OneShare.com, a site that specializes in selling single shares of stock as gifts.

OneShare.com sells shares from about 130 companies; you pay the cost of the stock, plus transfer fees and framing that add about $90 to the cost of each share.

It’s not exactly a frugal option, but your kids will get real stock certificates to hang on the wall. They’ll also get annual reports, proxy statements and all the other paperwork that comes with being an investor.

Q: I recently attended an “elder planning” workshop. The presenter said my husband and I should sell our bank stock (worth $95,000) and buy an annuity that’s invested in the Standard & Poor 500 index. Does this sound like a good idea, or is it something to leave alone? We are in our 80s. The presenter is getting antsy and wants us to meet with him to take the annuity.

A: Of course he’s getting antsy. He’s imagining the fat commission he’ll be paid for talking you into what may well be an unsuitable investment.

Variable annuities, which combine mutual-fund-type investments with an insurance wrapper, often aren’t a good fit for elderly investors. You may be in too low a tax bracket to benefit much from the investment’s tax-deferral feature, and heavy surrender charges could take a big bite out of your savings if you needed to access your money in the next several years.

What’s more, selling your stock could set you up for a big fat tax bill, particularly if your shares have grown substantially in value over time.

A final problem with variable annuities: They aren’t given what’s known in tax circles as a “step up in basis.” Your stock would be revalued on your death so that your heirs wouldn’t owe any income or capital gains taxes if they sold the shares immediately. Withdrawals from variable annuities, by contrast, incur income tax.

Unfortunately, these downsides may not have been explained to you. The salespeople who promote variable annuities sometimes neglect to adequately illustrate their disadvantages, which is one of the reasons regulators have gone after insurance companies and agents in recent years for selling unsuitable variable annuities to elderly investors.

Bank of America, for example, just announced a settlement with Massachusetts state regulators that would allow customers who were at least 78 when they bought their annuities in 2003 and 2004 to liquidate them without having to pay surrender charges.

Now, it’s entirely possible that you might be better off in an index fund or even a certificate of deposit than having so much money wrapped up in a single stock. But you’ll want to discuss that issue with someone more objective than an annuity salesperson, such as a fee-only financial planner.