Is Your Money Green and Growing…
Or Ripe and Rotten?
Many investors, who are worried about day-to-day market volatility, shun growth stocks. They feel that because the money they’re putting away is so crucial to their financial future, they should place it in very conservative investments. But to grow your nest egg large enough to see you through a retirement that may well last 20 or 30 years, you just can’t afford to play it too safe. Why? Inflation!
Since 1926 inflation has averaged around 3%, while safe investments like U.S. Treasury Bills have averaged about 3.5% and long term Government bonds around 5%. When you factor in the low interest rates you’re earning, then subtract the taxes you’ll pay less the rate of inflation, in many cases that “safe” investment has you actually losing ground and going backwards. The questions are: How safe can any investment be that has lost you the only real value your money ever had, your purchasing power? How can you prevent your purchasing power from rotting away?
The Case for Growth Stocks
With a historical rate of return of north of 11%, growth stocks have traditionally provided excellent protection against inflation. Studies by institutional firm William O’Neil + Co., Inc. going back to the 1880s have shown that 3 out of 4 of the biggest winners in the stock market were growth stocks. The key to investing in growth stocks is not to buy them with simply “a hope and a prayer” – to be successful, you must employ a viable strategy.