Where Is the Best Place for Your Money to Grow?
So you’re looking for the best place to grow your money. Is it the stock market?
That is, unless you already own a profitable, growing business. If you already own a profitable, growing business, it is probably your best place to grow your money.
The Proof is in the Long-term Returns
The ultimate proof of the success of an investment is the return it consistently generates. Particularly over a significant length of time, like 30 years or more. Over that period of time, the stock market (meaning the collective activity of buying or selling shares in publicly-traded companies) has generated some of the highest returns of any asset class.
Let’s compare the 30-year returns of the stock market and the bond market (Stock Market vs Bond Market: What’s the Difference?).
According to data published on October 31, 2019, over the last 30 years:
- The S&P 500 Index generated an annualized 9.88% return
- The NASDAQ Composite Index generated an annualized 10.15% return
- The Russell 2500 generated an annualized 10.55% return
These stock returns are all higher than the bond indices during the same time period:
- Bank of America / Merrill Lynch 1-5 Year Government/Corporate Bonds (A+ Rating) generated an annualized 4.74% return
- Barclay’s Government/Corporate Bond Index generated an annualized 8.04% return
- Bank of America / Merrill Lynch US High Yield Index generated an annualized 8.29% return
Very importantly, the stock market returns were well above the annualized 2.42% rate of inflation for the same time period.
But What About Other Asset Classes?
But how did other asset classes do over that same, 30-year time frame? Let’s look:
- Gold: 4.91% annualized return*
- Commodities: -4.59% annualized return*
- Oil: 7% annualized return (20-year time frame since 1999)*
*according to https://www.portfoliovisualizer.com/historical-asset-class-returns
There are other asset classes in which you can invest, such as real estate, hedge funds, art, etc.,that could generate greater annualized returns over a long time period. However, other asset classes may not be as liquid as stock investments are and may require the help of select specialists to understand. Liquidity (access to your cash) is an important factor
Talk with a Registered Investment Advisor
If you are actively investing, or thinking about starting, you’ll want to visit with a Registered Investment Advisor. We can help you avoid the seven investment mistakes “rookies” make.
Anatoliy Cherevach is a Chartered Financial Analyst and a Portfolio Manager with Kunath Karren Rinne & Atkin, LLC, with over 19 years of portfolio management and security analysis experience. Prior to joining KKRA, he was a Portfolio Manager and Research Analyst with Cohen & Steers. Anatoliy holds an MBA in finance from Pacific Lutheran University and is an active member of the CFA Institute and CFA Society Seattle.Tags: growing your money, investments