Stocks vs. CDs

Stocks vs. CDs, which one is better? Let us look at all the facts, shall we? Here I have put together a list of reasons why putting your money in the stock market is better than putting it in a CD.

1) Stocks give you financial freedom. We all know that CD’s are safer than stocks. CDs are guaranteed money. But we also know that earning 3-5% on your money is never going to make you financially free. Unless you already have 10 million to invest it is not really worth it.

2) Stocks make larger returns. When you put your money in a CD you may only earn 3-5% a year. Yet there are hundreds of people who have been able to make over 100% return on their money year after year in the Stock Market. Let’s tune it down. Say you take a few months to learn how to trade stocks and you can make only 20% off your money year after year. Now what would happen?

You put $10,000 in a CD for 10 years at 5% you would have $16,288. OK, you made money. What if you took that same money and invested it to earn an average of 20% a year after 10 years you would have $61,917. Now are you interested in stocks?

3) Another disadvantage with CDs is that you can’t pull your money out. If you put your money in a 1 year CD you can’t pull it out for 1 year. Or if you do you’ll pay penalties. Who wants to deal with that? What if you really need the money? Had you invested in the stock market you would be able to pull it out.

4) Banks invest your money. Now let’s look at this scenario. You are at the local Fair. You have a ticket that will get you a funnel cake for free. You really want to eat this funnel cake. It is your favorite treat. It’s rich flavor always makes you happy. And you have a ticket to get it for free. Your friend Bob on the other hand tell you that he will give you a piece of this funnel cake if you give him your ticket.

Would you take this offer? Probably not, so why would you let the banks give you the same deal? When you put money into a Bank’s CD what do they do? They take that money and invest it. They put your $10,000 in the market, make $1000 off it and give you your money back plus maybe $100. They get a free $900 from you.

5) Inflation hits you hard. If you put $10,000 into a CD at 3% for 1 year you would have $10,300. Did you make any money? Think about it, if inflation is 3% your money would lose just as much value as it gained. In other words your $10,300 would have the exact same buying power today as your $10,000 did a year from now. Inflation makes CD holders unable to make a profit.

So, in a stock vs. CD competition the stocks win.

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