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The Water Cooler
General Discussion
Can Investments Be Guaranteed Against Loss ?
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<blockquote data-quote="SlugSlinger" data-source="post: 3314171" data-attributes="member: 7248"><p>This is exactly correct. A good example is a savings account or cd.</p><p></p><p>There is also more to risk than losing dollars in the stock market. You can also lose money, ie purchasing power when you put your money in the bank earning less interest than the rate of inflation.</p><p></p><p>An example: a dollar is deposited into a savings account. The day you made the deposit, that dollar could buy a gallon of milk. A year later, say you earned 1% on the dollar. You now have $1.01. However a gallon of milk is now $1.10. You have lost money, effectively ~9%, in the way of purchasing power. </p><p></p><p>Investing in the broad stock market, like an index fund, essentially covers the risk of losing purchasing power. However there is additional opportunity, risk and volatility that comes to bear in the stock market.</p></blockquote><p></p>
[QUOTE="SlugSlinger, post: 3314171, member: 7248"] This is exactly correct. A good example is a savings account or cd. There is also more to risk than losing dollars in the stock market. You can also lose money, ie purchasing power when you put your money in the bank earning less interest than the rate of inflation. An example: a dollar is deposited into a savings account. The day you made the deposit, that dollar could buy a gallon of milk. A year later, say you earned 1% on the dollar. You now have $1.01. However a gallon of milk is now $1.10. You have lost money, effectively ~9%, in the way of purchasing power. Investing in the broad stock market, like an index fund, essentially covers the risk of losing purchasing power. However there is additional opportunity, risk and volatility that comes to bear in the stock market. [/QUOTE]
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