When markets turn volatile, keep a long-term focus
Donât let short-term market changes impact your long-term goals. Hereâs why.
The post When markets turn volatile, keep a long-term focus appeared first on Discover Bank – Banking Topics Blog.
Prices
How much does the stock market return?
One of the fundamental ideas I try to promote here at Get Rich Slowly is your savings ought to be invested for long-term growth. You ought to use the magic of compounding to create a wealth snowball.
Naturally, you want put your money into an investment that offers a reasonable return and acceptable risk. But which investment is best? I believe — as do most financial experts — that you’re most likely to achieve high returns by investing in the stock market.
But why do so many people favor the stock market? How much does the stock market actually return? Is it really better than investing in real estate? Or Bitcoin? Let’s take a look.
How Much Does the Stock Market Return?
In Stocks for the Long Run, Jeremy Siegel analyzed the historical performance of several types of investments. Siegelâs research showed that for the period between 1926 and 2006 (when he wrote the book):
- Stocks produced an average real return of 6.8%. “Real return” means return after inflation. Before factoring inflation, stocks returned about 10% annually.
- Long-term government bonds yielded an average real return of 2.4%. Before adjusting for inflation, they had a return of about 5%.
- Gold had a real return of 1.2%. “In the long run, gold offers investors protection against inflation,” writes Siegel, “but little else.”
My own calculations â and those of Consumer Reports magazine â show that real estate does worse than gold over the long term. (I come up with a real return of just under one percent.) Yes, you can make money with real estate investing, but it’s far more complicated than just buying a home and expecting its value to soar. (It’s important to note that returns on real estate are a contentious subject. This recent academic paper analyzing the rate of return on “almost everything” found that housing actually outperforms the stock market by a slight margin.)
Siegel found that stocks have been returning a long-term average of about seven percent for 200 years. If
youâd purchased one dollar of stocks in 1802, it would have grown to more than $750,000 in 2006. If youâd instead put a dollar into bonds, youâd have just $1,083. And if youâd put that money in gold? Well, itâd be worth almost two bucks â after inflation.
The advantages of buying and owning a home
Over the past three months, I’ve written a lot about buying and owning a home. Much of what I’ve written could be construed as anti-homeownership. Hear are some of the articles I’ve published recently:
- A brief history of U.S. homeownership.
- The high cost of homeownership.
- Does the American Dream require a big American home? (Spoiler alert: No.)
- Is your home a better investment than the stock market? (Spoiler alert: No.)
- Is it better to rent or to buy? (Spoiler alert: It depends.)
Last week, a GRS reader named Carmine left this comment:
I appreciate this and other recent posts on the perils and difficulties of home ownership, but theyâre sort of piling up into a major downer as I read them!…Canât you write something talking about the payoffs that home ownership can bring?
Challenge accepted!
I can understand how Carmine might view all of this as a downer. And I can see how anyone might think I’m anti-homeownership. But here’s the thing: I’m not. After all, I own my home, and I like it.
Today, let’s take a look at some of the advantages of homeownership.
Hawkish Fed couldnât curb market optimism â and mortgage rates tumbledÂ
The latest Freddie Mac index measured the 30-year fixed mortgage rate at 6.09% on Thursday, down four basis points from the previous week.
“Not My House!”
As you saw from Stan’s earlier post, home values continued to slide downward in the first quarter,…
Mortgage Forgiveness For Underwater Homeowners: Will Obama Forgive Billions Of Dollars In Mortgage Principal?
I was reading up on what’s new in the mortgage markets and the economy over the weekend, and one piece of reporting caught my eye because it seemed like it couldn’t possibly be true. It was talking about how the Obama administration is considering making a move later this month where Fannie Mae and Freddie […]
The post Mortgage Forgiveness For Underwater Homeowners: Will Obama Forgive Billions Of Dollars In Mortgage Principal? appeared first on Bible Money Matters and was written by Peter Anderson. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.
How do you decide what to spend on a computer?
Decide to buy a computer these days and immediately you’re confronted with a complex decision process wherein you pit features against price. The choice is intensely personal and a total reflection of your tastes, priorities, and pocketbook. I know how I’ve gone about it in the past, but I was curious to see how other people approach the problem.
It wasn’t hard to get people to talk. (People are passionate about their computers!) But as they did, I identified three basic methods to decide on price:
- The features route
- The cheap route
- The set-price route
Now that I think about it, this may be true for a lot of purchases!
The Clumsy Traveler Saves for a Trip
Welcome back to The Clumsy Travelerâs financial planning series to save for an amazing vacation. Todayâs post will tell you everything I do to save before traveling or making any major travel purchases. If youâre wondering where Iâm going for my birthday trip the answer is: No, I still havenât chosen my location. This
The post The Clumsy Traveler Saves for a Trip appeared first on MintLife Blog.
Recognizing economic seasons: Recovery and growth
(Since April is Financial Literacy Month, a number of articles will be devoted to more educational topics. This is Part II in a four-part series about how understanding economic cycles could inform your financial decisions. Part I is Understanding economic cycles: An introduction. Part III is The fall and winter seasons of the economic cycle. Part IV is How to profit from economic cycles.)
In Part I of this series, the introductory post about economic cycles, we discussed the fact that the economy, while growing over the long term, moves in up-and-down cycles and that each cycle can be broken down into four phases that mirror the four seasons of nature. In this section, we will explore what we identified as the spring and summer seasons of the economic cycle by considering two fictional crop farmers (Farmer Fred and Farmer Claude) whose livelihoods depend on how well they manage their work each season.
Farmer Fred is a successful farmer; but his neighbor, Claude, less so. (We’ll just call him Farmer Clod.) But let’s dive into the seasons and see what each does that causes them to be successful or not. Nature programs always begin with the newness of spring, so why don’t we start there?
On Russia and Ukraine and Your Investments: 8 Questions You Should Consider
Should you adjust your investments based on the potential conflict between Russia and Ukraine? Here are 8 questions to consider.