Money

I was talking to some of my friends out here recently and apperently, alot of people do not investe money. And I, for the life of me, can't understand why. Its like people believe that the stock market works by some voodoo magic. I just don't get it. Inflation is typically around 3% a year. It will vary of course but thats a pretty fair standard to work with. However, most savings accounts at banks only pay about the same amount or less. In order to make money on your money, you need to outgain inflation.

There are of course many things you can invest in, but its odd that so many people don't. The easiest and safest is a money market account. The idea here is that you give your money to a bank or investment company and they invest it into guarenteed securities. The cost is almost always 1 dollar a share but the return is usually a little better than whatever your bank would give you in a CD. Its better cause its entirely secure, and you get a better rate than a personal CD, since the money market can leverage their larger mount of money into a better rate of return.

But you dont make significant gains over inflation with a money market, which is really a glorified savings account. To do that, the most common approach is to invest in ownership assests, the most common being stock. The S&P 500 is the index of 500 companies that are representative of the market as a whole, its a generally good indicator of performance. As a historical note, the S&P averages a return of 10.8% since its inception. Thats a significant gain of money. Consider this, based on those historical rates (dating back close to 100 years) the amount of money you invest will double in about 7 years. That means that if you start investing at my age (as most of the people reading this are) then any money you put in will double 4 times, or be 16 times the original amount. If you invest 10,000 now and leave it, then you have over 160,000 when you retire. Thats huge.