Beating Inflation with Penny Stocks
Saving money has always been about the general principle of spending less than you earn. If your savings account is a bucket of water, imagine that your income is a rain falling in the top and your spending is a hole in the bottom. If you have a large whole in the bottom and its not raining much, it will eventually be empty.
But what many people dont realize is that the flow of money into and out of a savings account is not the only factor. Inflation is a real savings-killer, and it is silent. Think back to the bucket analogy. Imagine that you need to use the water in the bucket for simply quenching the thirst of you and a baby elephant. One days worth of saved rain on day one might be the amount might be enough for the baby elephant for one day. But, as the elephant grows, one days worth of saved rain wont be enough.
The economy works this way too. If you put $100 aside every year, youll have a total of $1000 after ten years. But, the money wont be worth as much. Inflation is like a growing elephant. That thousand dollars you saved over the course of the years from 2000 to 2010 isnt worth $1000 now. Its worth something more like $750.
The stock market has long been seen as a hedge against inflation. If you put your money in a jar it will be worth less when you take it out. If you put it in a savings account that bears interest, it might depreciate slower than in a jar, but probably still wont be worth as much as when you put it in. The stock market tends to track with inflation better than either of these two.
Penny stocks tend to have all the aspects of the stock market as a whole, but in form exaggerated when compared to other savings vehicles. That is, any attribute that distinguishes a typical stock from a savings account a penny stock will have in spades, including increased potential for gains to wild swings in volatility. Navigating the difficult world of the stock market, and determining which penny stocks to buy can be difficult. Research is best left to those who have an expert level of knowledge of the market.
Category: Penny Stock Tips
