Diversification: The Key to Your Investment Success
book "The Truth About Money")
I saying all your money should be in stocks or stock funds?
course not. Nobody should subject all their money to just one
it's easy to understand why people don't like risk, in truth
there's nothing wrong with placing your money at risk; in fact,
it's impossible not to, for even bank accounts place you at
risk, if only due to taxes and inflation. Thus, every investment
choice involves risk. The key, then, is knowing which risks
people are willing to gamble small amounts of money, as the
popularity of lottery tickets, casinos, and football pools attests.
Gamblers know they can't earn big money unless they're willing
to take big risks. The secret, then, is to learn how to take
let's learn how to do that. Say you have $25,000 to invest for
25 years. If you choose a 5.25% CD, your account would grow
to $96,621 (ignoring taxes).
the other hand, lets say you split your $25,000 evenly into
five piles as follows:
the first pile, you buy 5,000 lottery tickets, and like almost
everyone else who plays the lottery, you lose it all. Thus,
after 25 years, the ending value of this $5,000 is zero.
the second pile, you bury it all under your mattress. Thus,
by earning no interest for 25 years, this $5,000 remains $5,000.
the third pile, you open a bank savings account at 2% interest,
where it grows to $8,240 over the next 25 years.
With the fourth pile, you buy a U.S. Treasury earning 7%.
This pile grows to $28,627.
with the fifth pile, you invest in the stock market, and although
the average stock fund earned over 14.5% over the past 10
years , we'll say yours performed below average, earning only
12% per year. At that rate, your $5,000 will grow to $98,942.
total, you have $140,809 - $44,188 more than if you had invested
the entire amount in a CD - even though you lost all of the
first pile, earned nothing on the second, invested in bank accounts
with the third, super-safe government bonds with the fourth,
and "gambled" in the stock market only with the last fifth.
Compiled by Thomas George
Biblical Answers to your Problems
Savitrie gives you the Biblical answers to questions
such as burning the Koran, Barack Obama, astrology, psychics, abortion,
the morning after pill, gay marriage, Harry Potter, white lies, divorce,