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.
Monday, November 10, 2008
Best Stock to Invest In
So, you’re looking to secure your future, huh? And the best way you thought how to do so is by investing in the stock market. Well, let me tell you something… good choice! The business of stock trading and stock investing is a very rewarding one indeed, but only if you dedicate enough discipline and hard effort is put into understanding it. I guess your immediate question would be, which is the best stock to invest in?, right?
I could talk to you about all the popular and good stocks to buy out there, but that’s just the problem… their too popular. From my own experience I can say that one of my best stock picks was of a small company back in ’89… now one of the – if not the most – powerful multinational corporations in the world. I’m not going to reveal the company’s name though, but at the time I bought them, is was selling penny stocks. It cost be around $0.70 to buy one stock, so I bought a bunch of them. It was risky but, then again, I only spent around $400 bucks.
The Early Years
The first year, my little NASDAQ penny stocks went up around +0.30. That means they were up to $1.00! that was good knows! But I wanted them to go up a little further and then sell them so I could make the difference… To my surprise they dropped to $0.90 – something like that. But this wasn’t a bad surprise for me, somehow I ended up buying a whole bunch more… spent around $2,000! To this day I don’t know why, but I took the risk!
For the next 10 years the stocks skyrocketed and I was selling and buying and selling and buying… From a bunch of day trading penny stocks, I made a great deal of money, but the thing is… by 1999 they weren’t penny stocks anymore! Their price had gone up to a whopping $50 per stock! How about that! Life was good! And still is… Thanks to that moment!
In Short
What I’m trying to say here is, the best stock to invest in isn’t always the one that’s worth hundreds of dollars. Sometimes you just have to go for it and take the risk with penny stocks, and sometimes with enough research you know the penny stocks are going to explode some day and make you a real fortune!
I could talk to you about all the popular and good stocks to buy out there, but that’s just the problem… their too popular. From my own experience I can say that one of my best stock picks was of a small company back in ’89… now one of the – if not the most – powerful multinational corporations in the world. I’m not going to reveal the company’s name though, but at the time I bought them, is was selling penny stocks. It cost be around $0.70 to buy one stock, so I bought a bunch of them. It was risky but, then again, I only spent around $400 bucks.
The Early Years
The first year, my little NASDAQ penny stocks went up around +0.30. That means they were up to $1.00! that was good knows! But I wanted them to go up a little further and then sell them so I could make the difference… To my surprise they dropped to $0.90 – something like that. But this wasn’t a bad surprise for me, somehow I ended up buying a whole bunch more… spent around $2,000! To this day I don’t know why, but I took the risk!
For the next 10 years the stocks skyrocketed and I was selling and buying and selling and buying… From a bunch of day trading penny stocks, I made a great deal of money, but the thing is… by 1999 they weren’t penny stocks anymore! Their price had gone up to a whopping $50 per stock! How about that! Life was good! And still is… Thanks to that moment!
In Short
What I’m trying to say here is, the best stock to invest in isn’t always the one that’s worth hundreds of dollars. Sometimes you just have to go for it and take the risk with penny stocks, and sometimes with enough research you know the penny stocks are going to explode some day and make you a real fortune!
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