Dealing strictly from a “one or the other” standpoint, I would still chose capital gains (stocks) over compound interest (CD’s/money market/T-bills). There are several reasons for this. First is the tax advantages of capital gains compared to interest income. When you earn interest on a CD, that interest is taxed as regular income at your income tax rate whether you take the interest or leave it in the CD! By comparison, if a stock you own appreciates in value, you don’t pay taxes until you sell the stock. If you do sell after owning the stock for at least a year, you are taxed at the lower capital gains rate on your profit.
For example, if you are in the 25% tax bracket and make 5% on a $10,000 CD, your $500 of interest is taxed at the 25% rate, leaving you with $375. If, on the other hand you made 5% on $10,000 of stock and sold after a year, you would be taxed at the 15% long term capital gains rate and have $425 left after taxes. This alone is reason enough to chose capital gains over interest income, all else being equal.
Of course, in real life all else is rarely equal. The choice is usually between a lower guaranteed return from a bank CD and the possibility of a higher return by investing in stocks. For many retirees, the “safety” of the CD is very appealing and they put most or all of their money into such investments. However, there are more types of risk than simply risking loss of your capital in the stock market. Inflation, interest rate uncertainty, and increasing medical expenses are all risks that need to be taken into account, in addition to the tax differences I mentioned earlier.
On the 5% CD I used in the above example, the real return was only 3.75% after taxes. Inflation has historically been between 3 and 4%, making your real return essentially zero. That is assuming a 5% return, which in this falling rate environment is harder and harder to find. I work in a bank and see many retirees who rely on interest for income. In the last three months, rates have fallen .5-1% on most CD’s, effectively giving these people a 10-20% pay cut and often requiring them to dip into their principle to maintain their standard of living. Combine this with frequently rising medical costs and it adds up to a difficult financial situation to be in on a fixed income.
By keeping a portion of your retirement savings in a conservative portfolio of quality, dividend paying stocks you can reduce the risk of inflation and falling interest rates eating up your savings. While it is true that there is volatility in the stock market that can be avoided with CD’s, the long term growth potential is too important to ignore even in retirement. A person retiring at age 65 has at least a decent chance of living to 80 or beyond. That is a planning horizon of at least 15 years, and over such time frames stocks outperform any other investment class. Long term planning doesn’t end at retirement, it just enters a new phase. The growth potential of stocks has its place in the retirement phase too. This capital growth is vital to ensure that your savings will last as long as you do!
Online become a new trendsetter for people who want to starting their business. Why we should choose online business? the main reason is more simple because we don’t need invest our money to buy physical asset like office and wider market than ordinary business which didn’t use any internet as media. Now everything could be sell using internet. For example online optical. The popular online eyeglasses shop like zenni optical is one of unique online business. Holiday Glass Frames From Zenni Optical is something which we never imagine that optical store could be online business.
When we visit optical online, there are a lot eyeglasses model like $ 8 Complete Rx Eyeglasses. So In the future online business would be a new trend, Not just online optical, also another business opportunity like online games, online casino, online payday loans. If you have interneter as your market, you should considering this option.
In the financial crisis era like now, we need give more attention when we want to taking a credit to support our financial needed. Why? first we never know actually when we need extra cash for our daily needed or our business needed. And suddenly you must have some amount of money. Second, in the financial crisis era like now, we never know and could make rational prediction what would happen in our future and now all of loan policies has a good policies for us. Credit requirements vary depending upon which loan program is best suited for you. There are a lot of loan various which have different purposes and use. Unsecured Personal Loans, Business Loans, and any others Loans are a loan which each of them has different function and of course different rates and terms.
So what you need is analyzing what kind of credit which are the most suitable with our needed. We couldn’t take business loan for our personal needed, etc.
When you borrow money you want to make sure you are working with a company that has a track record of success. Most people don’t know where to get started when it comes to financing and waste valuable time shopping around without any real direction. And sometimes took a wrong credit policies could make our condition getting worse. And it could impact our credit scores which make more difficult when we want to a credit in the future