Stocks and stock funds offer investors the potential for long-term growth, as well as the potential to outpace inflation.
The Potential for Long-Term Growth
Investors choose stocks and stock funds primarily because they offer the potential for higher returns than bonds or cash investments over the long term, although with greater risk and volatility. Volatility refers to movements in the price of an investment. Stocks typically have higher volatility than bonds or cash investments, meaning that stock prices tend to fluctuate rapidly, with wider swings in price. Despite short-term price fluctuations, however, stocks as a group have tended to outperform bonds and cash investments over long periods of time. Although loss is always a possibility, stocks can be a good choice for investors with long-term goals who are willing to accept more risk for the potential of a higher return.
The Potential to Outpace Inflation
Investing in stocks and stock funds may also help you manage inflation risk – the risk that your investment returns will not keep pace with increases in the cost of living. For example, if inflation increases 3% this year, you will need a 3% return on your investments just to maintain their real value and purchasing power. Because stocks offer the potential for higher returns than bonds or cash investments over time, including stocks in your portfolio may help your investment returns outpace inflation in the long run.
Please Note: Past performance is not a guarantee of future results. Before investing in a mutual fund or an exchange-traded fund (ETF), please consider the fund’s investment objectives, risks, charges, and expenses. For additional information, please contact a Samuel Goldstein & Co. professional.