It’s more important than ever to make smart investment decisions and understand the forces that affect investment performance. You may ask yourself, “Why should I consider investments instead of just depositing my money in the bank?” The answer is savings accounts are particularly vulnerable to the “silent thieves” that impact your ability to save for your long term financial security.
The “Silent Thieves”
Although the U.S. has experienced relatively low inflation over the past several years, a gradual increase in the cost of goods and services can erode your purchasing power over time. Today’s dollar simply won’t buy the same goods and services in the future.
No one likes to pay taxes — especially when you work so hard for your money. Taxes essentially reduce the rate of return on your investments. The higher your tax bracket or the higher the inflation rate, the greater the impact on your real rate of return and the more you’ll need to consider tax-free or tax-deferred investment alternatives.
Investment Concepts to Overcome the “Silent Thieves”
The longer you invest, the longer your money has to grow and compound. The power of compounding is the single most important reason for starting to invest right now.
- Dollar-Cost Averaging*
Dollar-cost averaging can help boost your purchasing power. Each month (or pay period), you contribute a specific but equal dollar amount to your investment program to purchase mutual fund shares. As market prices fluctuate, you will end up buying more shares when prices are lower and less when they are higher; in essence, it’s effectively lowering your overall cost of shares.
*A plan of regular investing does not assure a profit or protect against loss in a declining market. You should consider your financial ability to continue your purchases over an extended period of time.