Is Safe Investing An Oxymoron?

Some people find the two words 'safe investing' in the same sentence to be ridiculous.

When we see headlines during a market decline and hear commentators make dire predictions that's not too surprising. The market then seems to be nothing but a rigged casino.

In fact, as we will show in articles in this section, the market is really the safest place for your savings over the long term. It is dangerous short term. What this says is that the stock market is the best place for retirement saving, especially early in the process.

In this part of the website we will discover safe investing measures such as:

* How to profit from declining markets - Markets will always decline from time to time so how can we benefit from this fact?

* How, over time, to buy low and sell high without fail - Lowering the average cost of your shares exposes you to less risk of loss.

* The greatest dangers for investors are fear and greed - How can these natural prehistoric survival instincts be curbed?

* How discipline can bring greater safety, and what that discipline entails.

* Protecting against surprise corporate bankruptcy.

Use the simple methods we suggest and investing in stocks will no longer be a gamble; as nearly as it is possible to make it, it will be a certain way for you to increase your wealth. Is there proof of this or is it a top-of-the-head remark?

The Federal Reserve database in St. Louis has investment analysis from the start of 1938 when stocks rose a heady 43.81% - just before the start of The Great Depression - to the end of 2008.

The Fed data compares returns on three-month treasury bills, 10-year treasury bonds, and stocks. In each case, starting capital was $100. The T-Bills were rolled over every 90 days. The 10-year bonds include interest and price appreciation when that occurred. Stocks assume dividends were reinvested.

The dangers of long-term savings in 'safe' accounts are easy to see after deducting taxes and inflation. $10,000 saved in treasury bills over time would yield average annual interest of $380. Not startling but a far cry from today's rates. What most people fail to consider is that federal tax will on average claim $95. Local taxes will average $36.86. But the biggie is inflation. Over those same years, it has averaged 3.4%. There goes another $340 of your $380 prized income.

For the privilege of lending the government $10,000 your purchasing power fell by $91.86. Compound that by 20 years or so and see what little you have left. Banks saving accounts offer a worse deal.

So are you safe investing in bonds?

Bondholders invested in 10-year treasury bonds, compounding gains and interest, would have seen their $100 grow to a slightly more respectable $6,013.10.


Even after the two worst years in recent memory and after a net loss for the past 10 years, $100 compounding (negatively) right through The Great Depression, various wars and assassinations, countless recessions and every other negative thing that could be thrown at the economy ended 2008 with $112,868.13.

Safe investing is not about protecting dollars, it's about protecting purchasing power.



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