October 21, 2014

What is the real return on your money? Why should you care? Options?

2 thoughts on “October 21, 2014”

  1. Garrett Haag says:

    The real return is what you make after you take in to consideration costs, fees, and inflation. It is the money you actually get out of an investment or saving your money. Inflation will eat up your money in the bank and will net a negative real return with the current interest rates. That is why you want to keep your money in no load index funds at a place like Vanguard that on average will beat inflation over any given period. You should care because you do not want to lose the money you are trying to save. If you save your money in the bank it will shrink over time not grow like you want it too.

  2. Mike Finley says:

    Right again, Garrett. Let’s review.

    The real return is the nominal return – the inflation rate. If you earn .2% in the bank on your savings and inflation is running at 3%, then your real return is -2.8%. Translated? Your money is shrinking right before your eyes. If you want to avoid “shrinkage” take risks with your money. Those risks should be wise and prudent, but they need to occur if you want a positive real return. A wise option is owning no-load index bonds and stocks at a place like Vanguard.com. Awake!

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