Saving for retirement is something that every person needs to start thinking about at some point. Around 39% of adults that are saving will start doing so in their 20s, with a quarter beginning in their 30s. At that point, they weigh their options: should they simply put the money aside in a savings account, or should they start investing it in stocks? Well, here are the benefits of choosing stocks over other savings methods.
1. Potential for Higher Returns
Compared to bonds, savings accounts, or 401(k) plans that get an average of 3-8% returns, stock investments have around 10% returns. That’s how it’s been like since 1926, especially if you choose your stocks wisely. This means that by the time you get to the age of retirement, you’ll have even more money waiting for you in your bank account, ensuring a happy retirement.
2. Diversified Option
You can create quite a diversified portfolio by investing in stocks, regardless of your industry of interest. You can look up FX-LIST (online list of brokers) to find a Forex opportunity, try your luck with real estate, or invest in a company that you caught a particular interest in. You can learn how to reduce the risk yourself by making a smart investment every time.
3. Pride of Ownership
Let’s say that you saw the potential in Tesla stocks and decided to buy as well. How many people can tell their grandchildren in their retirement days that they own a small part of Tesla? There’s a certain pride in owning a small fraction of a specific company, especially when you love or believe strongly in it – and if it ends up bringing you lots of returns as well, then it will be even better.
4. You Can Start Small
The average millennial doesn’t have much money – and as a result, they can’t afford to spend that many funds on annuities and other similar investments. They have their debt to think about. That being said, thanks to online brokers, most of which ask for no commission, an investor can easily buy a share with just $100. Nurtured right, that share can end up being worth a lot in the future.
5. Earns Passive Income
Companies will often pay dividends to the shareholders – meaning that they give away a portion of their profits to those who invested. This extra income can add to your retirement account, growing its value. This way, you will have all the money you need to properly enjoy all those vacations that you missed while working.
6. Protects Against Inflation
Inflation has always been an enemy of every person trying to save some cash. However, by investing in stocks, you protect yourself against that. Inflation has remained steady at 3.1% every year for more than a century – and with the double-digit returns of stocks, there is nothing for you to worry about.
The Bottom Line
Your retirement days are the ones where you finally get to rest – and you need the funds for that. Stocks have shown to bring great returns, which is why you should consider investing in them.