I’ve seen a lot of sentiment this year about how it’s a “bad time to invest” and high yield savings accounts are paying so much, you might as well keep your money in cash. Well this year, a good high yield savings account is paying about 4% per year. For these first five months of the year, that would have net you about 1.7% in interest. Meanwhile, the S&P 500 is up over 12% including dividends.
If you think 4% in a savings account is pretty good, consider this: $10,000 invested for 40 years at 4% would equal $48,000. Not bad! $10,000 invested for 40 years at 10% (the historical market average) would be $452,000. And that’s just underperforming by 6%. So far this year cash has underperformed by over 10%. Investing consistently instead of just saving is the ENTIRE GAME of building wealth.
FOR THE REST OF YOUR LIFE, I promise you, you will hear from people like this emoji on the left. There have been doomsday naysayers since the beginning of time and they’re not going away any time soon. But don’t let them distract you from the optimal wealth-building plan. Invest early and often through good times and bad. When things look the worst, that may mean the best stock market rally is about to come. The night is darkest before the dawn.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Jeremy
