subject: Savings Accounts And Other Investments [print this page] When it comes to planning your finances for retirement, you will need to know about the benefits and disadvantages of savings accounts and other investments to be able to allocate your cash properly. You will have to invest as much as you can to make your money grow, although you will need to place some of your money in retirement savings accounts as well as ordinary savings accounts for safety. Here are some pointers on what happens to your money in a bank savings account, prime stock, and indexes.
Bank Savings Account
While some retirement investors believe that the national economic climate and its effects on over a hundred US banks has made putting money into a savings account disadvantageous (and kept their cash at home as a result), the chances of home theft or fire are more likely to occur and cut your nest egg dramatically. In addition, the FDIC insures money held in a failed bank for up to $250,000, still making banks a viable venue for retirement savers. The comparatively measly 1% interest your money earns annually from a bank is also likely to increase. The annual interest, which also compounds or accumulates due to the additional cash earned, makes a bank savings account a much better option than keeping a huge chunk of your savings at home.
Prime Stock
If you had invested a few thousand dollars in prime stock twenty years ago, you will have earned a fortune by now. For example, buying five grand worth of Apple stock in 1985 would have turned that initial investment into a cool half-million today. While the chances of such foresight and investing savvy happening are low, investing in stock from the same company can still give you more-than-decent returns on your investment. Remember that it is not easy to select prime stock because you are far more likely to buy one that performs moderately and generate an average yearly return of about 9% in dividends and appreciation over the same time frame.
Indexes
Indexes are a collection of stocks gauged more on how they perform as a set than individual ones. The Dow Jones Industrial Average is arguably the most popular index; one that has 30 stocks that represent the overall performance of the stock market. While average gains for the past decade were lower than 1% yearly, this investment venue still provides profits to some extent, making it a more viable choice than simply putting much of your money in savings accounts and other investments such as individual high-risk stocks.
