Investing Advice

Introduction to the Investing Concept of the Golden Piggy Bank

When I was about 3 years old, my parents brought home piggy banks for the children in our family. The little pigs were made of yellow, gold-colored glass. My mother said this was because in a way, saving money, wealth, and gold are really the same thing.

By saving our pennies, nickels and dimes, we would have over $10.00 when the glass pig was full. That was a small fortune to a child in the 1950ís, about the same as $70.00 today in buying power.

Our idea of "saving" money was hoarding just enough to buy that can't-live-without toy in between birthdays and Christmas. As a child, the future didn't go beyond the next holiday or beginning of the next school year. The future I was saving for was never more than a couple of months away.

Now, pay close attention. If just one of these handfuls of coins had been properly invested, it would have grown to over $33,000 when I retire in a few years.

So what is "properly invested"? Well, it certainly isn't a savings account. It isn't savings bonds or T-Bills or bank certificates of deposit. Yes, it does have something to do with the stock market. You'll learn everything you need to know about simple stock market investing in another chapter.

But isn't investing risky? Sure it can be. Can investing be safe, secure and a sure thing? It all depends on how you go about it. There are a few smart ways to invest, and many, many ways that guarantee that you will lose a lot of money.

A smart investor chooses a method of investing, follows through on the investment plan, and then over the years watches it happen.

A smart investor understands that the ultimate risk actually is not investing. A smart investor understands that investing is not a luxury, it is a necessity.

We all should have investment goals. We all want to be rich. The idea of building wealth may be appealing, but sounds unrealistic for the average family that is struggling just to pay the bills.

Even if we can accept the possibility that some magic investment tricks may be available to us, how do we save money when there is no extra money to save? And even if we save some each month, the small amount of interest a bank pays won't turn us into millionaires. But smart investing, not saving, is the key to building wealth.

Few of us understand the fundamentals of successful investing. We've learned that financial security comes from putting money in an account in our local bank or credit union. This is all right, of course, but limits our financial future to saving a few dollars. But through properly selected safe investments, your dream of wealth will come true.

So what are "properly selected safe investments"? Well, let me show you something that may surprise you. Let's take a look at the 25 years ending 12/31/99. Here is how well you would have done investing a lump sum of money:

Gold
Diamonds
Savings account
Treasury bills
Real Estate
Corporate bonds

a gain of
a gain of
a gain of
a gain of
a gain of
a gain of

16%
81%
154%
187%
279%
418%

- whoopee
- yawn
- just okay
- sounds good
- sounds great
- even better


Ok, now take a deep breath . . .
S&P 500 index mutual fund 2,123% - BINGO!

Am I playing games with statistics, by choosing the 25 year period that also includes the longest bull market (stocks are going up) in history? Nope.

Look at the 10 years ending 09-14-2001, which includes the disastrous bear market (when stocks are going down) of 2000-2001, just finishing a sobering 12 month period where the average mutual fund lost 27%:

$10,000 invested
Savings Account (an average 3%)
US Govt. Bond Mutual Fund
Corporate Bond Mutual Fund
Average Growth-Stock Mutual Fund

Grew to
$13,439
$18,171
$19,491
$26,875

Even with the 10 years ending with the market way, way down, the average growth stock mutual fund was still the best investment!

And take a look at the 75 years, 1926 through 2000, which begins with the crash of 1929 and the Great Depression, then ending in the midst of a crushing bear market. During these years, we experienced World War II, the Korean War, the Vietnam War, a president's assassination, years of near-nuclear war with Russia, and 12 recessions with high unemployment. But even still, $10,000 invested in US Govt. T-Bills grew to $165,600. Wow!

But $10,000 invested in the Pioneer Mutual Fund grew to $64,020,000 - Holy Cow!

You're getting the idea. Investing in the right mutual funds, not saving, can make you rich. What exactly are mutual funds? You are going to learn about these and other great types of investments.

But first, let's talk about what Ben Franklin called the Eighth Wonder of the World - compound interest.

Other "Why Invest Money?" Topics:

  1. Investing Introduction for Adults
  2. Special Investing Introduction for Children & Young Adults
  3. Introduction to the Investing Concept of the Golden Piggy Bank
  4. Compounding Interest - The Magic and Power
  5. Basic Investing Words You Need to Know

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Millions marry and start families each year without taking basic steps to make sure their future, as well as their children's, is financially secure.

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