FREE Articles & Content For Your Website
| Home » Finance » Investing |
Want To Invest? Stocks Are Your Best FriendBy Wilfrid Baptiste History suggests that stocks are the best investment you can make when you're in it for the long haul. No matter the investment vehicle, be it bonds, cash, diamonds, silver, gold, in the long run stocks give the best returns. I read in a lot of places that stocks returns are higher than real estate returns but I don't personally agree. Real estate returns are calculated on the basis of the property's appreciation, but if you want to calculate your personal return on a real estate investment, you have to account for the fact that only part of your investment was financed with your own money... But I digress... What happens if you compare stocks to cash over the long term? A good example of a cash investment is money invested in three-month Treasuries or a first-rate money market fund. A cash investment is NOT the emergency savings fund that is recommended you keep on hand for a rainy day. Over the past 60 years, cash has turned out to be a loser. After accounting for inflation, cash has returned an average 0.5% per year since 1926, compared to 6.9% for the S&P 500. If you want to invest in financial instruments but don't think you can handle the short term volatility of stocks, you might consider bonds. But how to they fare? Together, returns on large and small-company stocks averaged 11.3% a year since 1926. Long-term Treasury bonds did significantly less wel, averaging a 5.02% return over the same period. In all fairness, it has to be pointed out that bond yields don't generally match stock returns in the long run, but investing in bonds doesn't come with the wild swings that are a given with stock investing. As for other investment vehicles like precious metals, diamonds, oil, collectibles, there are times when they indeed return much higher yields than run-of-the-mill stocks. As a rule, stashing your cash in such vehicles is considered smart in times of high inflation, where stocks and bonds tend to underperform, but not in the long run. Returns on those assets vary wildly from year to year, and what is hot this year can be the biggest loser next year. It's undeniable that investing in the stock market requires a strong stomach, not only to stay in the market when stock values are going south, but to keep investing in those troubled times. But 80 years of financial data have shown us that the market has always rebounded from downturns, reaching higher levels each time. If the past is indicative of the future (and most analysts seem to think so), if you're considering investing, stocks may be your best friends. Just make sure you don't panic when there's a crash. How you allocate your portfolio among broad categories is probably more important than what specific stocks or bonds you buy. About the author Learn how to answer the most common 401k questions: 401k compounding effect, 401k contribution limits, and can your 401k be garnished |
|
This article was found at WellWisher.org.
|
|
| Publish This Article
You are free to re-publish this article on your website, however please ensure it is copied and displayed in its entirity without any changes. It must include the "About The Author" text and ensure all URLs are hyperlinked. Please review our terms and conditions regarding the reprinting of articles. Thank you. |
Related Articles
Successful IRA Real Estate Investing In Tough Times
Stock Market Forums - The Pros And Cons
Explore the Secrets of Online Stock Trading
Build a Profitable Business with an Angel Investor
Why You Should Only Be Investing In Quality Shares
An Investors Guide to Morocco
An Investors Guide To Italy
An Investors Guide to India
An Investors Guide to Hungary
An Investors Guide to Germany
Copyright © 2008 3SF Media and WellWisher