Risk and reward, an important concept to remember on a day like today when markets were down greater than 1%. To grow wealth you need to be willing to accept some level of risk. How much risk you can accept (handle) the more growth potential you have.
Three different levels of risk, three different possible levels of growth, and three different potentials levels of wealth.
- Cash (CD) returns earning 2% over 30 years with $10,000 invested each year = $405,680.07 in your account.
- Moderately Conservative Portfolio, say 60% bonds/40% stocks earning 4% over 30 years with $10,000 invested each year = $560,849.37 in your account.
- Moderately Aggressive Portfolio, say 40% bonds/60% stocks earning 6% over 30 years with $10,000 invested each year = $790,581.86 in your account.
The fact of the mater is nobody ever grew their net worth investing over the long term in “savings” vehicles. To grow wealth you need to take risk and doing so means stomaching down days and being able to deal with volatile markets and varying accounts values from day to day. I can’t tell you where markets will be tomorrow, or next week or next month but I can tell you five, ten and twenty years from now a diversified portfolio will be worth more than it is today.
If you haven’t recently reviewed your financial plan you should contact your CERTIFIED FINANCIAL PLANNER™ Practitioner.