The worst case is to place your savings in a bank account where you are lucky to get 1% and that is stretching it for many savings accounts. Many are much lower and in some European countries you have to pay the bank to keep your money! Let’s assume you have $10,000 and earn 1% a year. That’s only $100 income a year and if you have to pay taxes on that income you might only end up with $70!
If you place your money in a diversified conservative mutual fund, you might get as much as 3% after the mutual fund company takes their fees and that is in a good year. On average the gain plus income is around 2% or $200 a year in income before taxes.
The stock market averages better and if you invest in blue chip dividend paying stocks that pay 3% to 4% a year, with the opportunity for the dividends to be increased each year, you stand the chance of gaining on the market while still collecting income. Sure the stocks will go down and up, ie.e volatility, but if you invest well, your investments will keep place with inflation and be there for you when you retire.
Millennials Afraid of the Stock Market who invest in GIC’s and savings accounts will lose out on these gains and only really have what they are able to save. They will not be able to participate in the growth in the markets. For more financial mistakes to avoid, click here.
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