September 20, 2013

When investing our money, we MUST identify investments that have the potential to provide a positive real return. Why?

2 thoughts on “September 20, 2013”

  1. Rene says:

    Investments such as stock, bonds,and real estate can provide a positive real return. The hard part is to pick which ones. In order to do this, you have to consider the up front costs and the maintenance cost of ownership. If the investment will give you a more money than it cost to get and maintain it, then you have a positive real return. But if after subtracting the initial cost and fees that comes with it and the numbers put you in the negative, it is not a good investment.

  2. Mike Finley says:

    You were pretty darn close, Rene. The real return is your nominal return (let’s say .2 from your bank account) minus the inflation rate (currently running around 3%). .2 – 3 = -2.8%.

    We must consider inflation (and costs) when selecting our investments. Just as Rene stated, stocks, bonds, and Real estate have the potential to provide positive real returns on our money. To increase what we actually keep we MUST identify how to acquire and grow those assets at the lowest possible cost.

    A trip to Vanguard and an understanding of no-load index mutual funds will place you down the right path. Eliminate commissions and reduce fees to .2% or less per year. This is how wealth is created slowly over time. Compound interest does the rest.

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