In the urban community, stocks are often misunderstood and are not really used as a financial tool for retirement. Majority of us have the tendency to rely on a 401k that our employer provides for us as our only savings tool for retirement. Although some employers have great 401k’s with employer based matching, but as momma told me as a child….don’t put all your eggs in one basket. Stocks are great investment tools to invest in personally. And you don’t have to start with thousands of dollars. Create your own comfort level risk in the market. As the market changes, adjust your comfort risk. Case in point, your portfolio should be diverse to keep balance. “In general, people should be more aggressive in their asset mix when they are younger—that is, tilt more toward stocks,” says Steven Feinschreiber, senior vice president, financial solutions, for Strategic Advisers, Inc. (a Fidelity Investments company that is also a registered investment adviser).
For those who are “stock shy”, here are 4 reasons how stocks can make you 37% more awesome.
1. Stocks offer the most potential growth for your cash
Even with ups and downs in the market, U.S. Stocks have consistently earned more than bonds in the long-term. Lets analyze what a $100 investment would be worth over a period of time (starting when S&P began tracking performance in 1926). During this time, stocks returned an average of almost 10% annually, bonds 5.3%, and short-term investments 3.5%, before inflation. To no avail, it wasn’t a straight line up for all, but what this shows is that stocks typically offer more potential for growth over the long term. That’s why investing in stocks or stock mutual funds is so important when saving for retirement or other far-off goals. This is why it is vitally important to begin investing in stocks at a younger age versus when you are closer to retirement.
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