Читать книгу Personal Finance in Your 20s & 30s For Dummies - Eric Tyson - Страница 35

When you save money, you want to try and get higher returns. Bonds, stocks, and other investment vehicles (check out Chapter 10) typically produce much better long-term average returns than a savings account or a certificate of deposit (CD), which usually offers a measly 3 percent annual return over the long term (or much less in recent years). The trade-off with the stocks, bonds, and such is that you must be able to withstand shorter-term declines in those investments’ values.

If you put together a diversified portfolio of mostly stocks and a lesser number of bonds, for example, you should be able to earn about 8 percent per year, on average, over the long term. You won’t, of course, earn that amount every year — some years it will be less and some years it will be more. The following table shows how much you’d have after 40 years if you got a 3 percent annual return versus an 8 percent annual return.

Investment	3% Annual Return over 40 Years	8% Annual Return over 40 Years
One-time $1,000 saved	$3,260	$21,720
$1,000 saved annually	$75,400	$259,060

When you combine regular saving with more-aggressive yet sensible investing, you end up with lots more money.

Saving $1,000 yearly and getting just an average 8 percent annual return results in a nest egg of $259,060 in 40 years compared to ending up with just $3,260 if you invest $1,000 one time at a 3 percent return over the same time period. And remember, if you can save more — such as $5,000 or $10,000 annually — you can multiply these numbers by 5 or 10.

With historic annual inflation running at about 3 percent, you’re basically treading water if you’re only earning a 3 percent investment return. In other words, your investments may be worth more, but the cost of other things will have increased as well, so the overall purchasing power of your money won’t have increased. As I discuss in Chapter 10, the goal of long-term investors is to grow the purchasing power of their portfolio, and that’s where investments (such as stocks and bonds) with expected higher returns play a part.