When you're first getting started with investing, it can be overwhelming trying to figure out the best place to put your money. There are so many voices that will tell you a variety of places to invest, and most of them don't actually even know what they are talking about. The first question you should ask as you think about investing is this: What is my goal?

The goal of investing is simple: to grow your money over time, ensuring that at the very least, you beat the rate of inflation. Inflation decreases the purchasing power of your money year after year, so if your investments aren’t growing faster than inflation, your hard-earned cash is essentially losing value. You might technically have more dollars, but those dollars are not going to buy you as much as they would have before. 
​
​There are a whole bunch of ways to invest, with each option offering different levels of risk and potential reward. Three of the most common ways people try to get started with investing are with savings accounts, certificates of deposit (CDs), and with the stock market. I want to show you why, for many people, investing in the stock market offers the best potential for long-term wealth creation.


Savings Accounts Promise Safety, But at What Cost?
​
​Savings accounts are the most simple option for people looking for a safe place to simply hold their money. These accounts, offered by banks and credit unions, are easy to set up, liquid (meaning you can access your money pretty much whenever you want), and typically insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000... meaning if the bank collapses, you should eventually get that money back. 

While savings accounts promise security, their big downside is low interest rates. In 2023, for example, the average savings account rate in the U.S. was less than 0.50%. Even the best high-yield savings accounts generally only offer around 4% APY. This sounds like a decent rate until you consider that inflation has historically averaged 2-3% annually, and has been much higher in recent years. This means that even in a high-yield savings account, your money might only be growing slightly faster than inflation, or more likely, not keeping up, which means you actually are losing value. While savings accounts are great for short-term things or emergency funds, they simply are not designed to generate wealth or long-term growth.

Certificates of Deposit (CDs) Offer Some Returns But Lock Up Your Money.

Certificates of deposit (CDs) are another low-risk and low-reward investment option. When you invest in a CD, you agree to leave your money with the bank for a set period, which can range from a few months to several years. In return, the bank offers a fixed interest rate, typically higher than what you'd get from a savings account. As of late 2023, the average CD was paying only 0.24 to 1.88% with the best CD rates paying around 4-6%.

The big downside to CDs is that your money is stuck there. With a CD, your money is locked up for the term length (the life of the CD), and if you need to access it before the maturity date, you’ll usually face penalties. These penalties often mean that you get zero return on your money even after it has been locked up for months or years at a time. CDs are good for people who want a guaranteed return and don’t need immediate access to their funds. However, like savings accounts, CDs tend to offer interest rates that just barely outpace inflation, meaning they are not designed to create long-term growth

So How Does The Stock Market Compare?

Most people worry about the stock market because its returns are not guaranteed, which is true. What these people do not realize is that over the long term, the stock market has consistently outperformed other investment options and outpaced inflation. Historically, the stock market has delivered an average annual return of about 7-10% after adjusting for inflation. Investors in the stock market inevitably see loses some years, but if they simply remain true and let the markets rebound, they will see good levels of long-term growth. 

One of the biggest advantages of the stock market is its potential for compounding returns. This means that not only do your investments grow in value, but you also earn returns on your returns, make profits on your profits. Over time, this compounding effect can lead to significant wealth accumulation, especially if you start early and invest consistently. 

Unlike savings accounts and CDs, the stock market comes with risk. Stock prices can be volatile, and it’s possible to lose money in the short term. However, historically, those who hold onto their investments for the long term (5 to 10 years or longer) have seen strong gains. The key is to implement a good investing plan and to be consistent about how you invest. 

So Which Investment Is The Best? 

When it comes to beating the rate of inflation and growing your money over the long term, the stock market has a clear edge over savings accounts and CDs. While those low-risk options offer safety and a (mostly) guaranteed return, their interest rates are often too low to actually build investors' wealth. The stock market, on the other hand, offers the potential for much higher returns through compounding, making it an excellent option for long-term investors who are willing to accept some short-term volatility.

The Stock Market Is Great... So What? 
​
​Given that the stock market is a good place to invest, the next question someone should ask is how they can actually get started. A lot of people will simply give their money to someone else to invest for them, but what they don't realize is that over a 10 year or longer period, over 90% of financial advisors and hedge fund managers will actually underperform compared to the overall market. 

The truth is that you simply cannot trust someone else to invest your money for you... they will most likely not even keep up with the market returns, and why should they? They get paid for having you as a client even if you are losing money. The truth is that no one is going to care as much about your financial future as you do... So what does that leave you with? 

It leaves you with two choices:

One is that you can just invest with a 'professional' and hope they can do well over time or just put your money in a savings account or a CD where you might be able to keep up with inflation. 

The second choice is that you take your financial future into your own control by learning a little bit about the stock market and how to invest in it. You can decide that you will not allow your future to be gambled on the hope that someone else will care and you learn how to invest for yourself. 

With a little education, you can begin to understand how the stock market works and begin planing your financial future... 


Always remember, 

Your financial future is in Your Hands. 

- Ryan 

P.S. Check out this YouTube Video Where I talk about some of these same ideas: