Stocks Are Like Savings

Posted by D4L | Saturday, May 26, 2012 | | 0 comments »

It's amazing how contradictory individuals can be when it comes to matters of money. Ask someone why they have a savings account and the likely answer is to have that money earn interest over the long term. Ask someone why they invest in stocks and the likely answer is something similar. So why don't people treat these two types of investment in a similar way? In fact, if you invest prudently, both a savings account and a stocks account can be used the same way - the only difference is that you're likely to get a much better return with stocks.

Of course, to invest in stocks for the long term and to treat them like your long-term savings account, you need to invest your money in quality companies at attractive prices. Fortunately for investors, doing so hasn't been this easy in a long time. Today, some of the best value-to-price gaps exists within the best blue chip type businesses. While they have done well, they have not responded to the rally like the stock prices of inferior businesses that have weaker balance sheets and an inconsistent history of profitability. And since many of these names today pay out unbelievable dividends, the annual returns should be very attractive over the next several years.

Source: Investopedia

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