Recently I deposited more money in my brokerage account. I decided to do this in order to invest more in the stock market.
There are two big reasons why I made the decision to spend more of my money on investing rather than achieving other financial goals or putting my money in a savings account. Here is what they are.
1. Inflation means savings accounts lose value
One of the most important reasons why I redirect more of my reserve money to my brokerage account is that inflation is so high right now. In May, the consumer price index jumped 8.6% compared to the previous year. This is the largest increase in the cost of goods and services in decades.
Meanwhile, my high yield savings account only pays out 0.75% APY. This means that all the money I have in savings is sitting there losing substantial value.
Now I know I still need money in a savings account because I want to have cash available when I need it. This could be especially important for emergencies. And I also know that I don’t want to invest money that I might need very soon because I couldn’t wait for the downturns, so I always keep funds in savings that I have set aside for goals to short term .
But, I don’t put more than necessary in a savings account because I want to minimize the erosion of purchasing power that occurs. Since I already have a fully funded emergency fund and don’t have a lot of short term goals that I’m working towards right now, most of my reserve money goes into my brokerage where I can invest it and hopefully earn more returns to help me fight the effects of inflation.
2. Market downturns provide buying opportunities
Another reason I’m putting more money in my brokerage account is that the stock market has been volatile lately and I think a more prolonged downturn could occur due to current economic conditions.
When a downturn occurs, I view it as a buying opportunity because the stock prices of high quality companies tend to fall not because those companies are worth less, but because they become the victims of the crash. scholarship. This presents a great buying opportunity to get stocks at discounted prices.
I want to have as much money in my brokerage account as possible so I can take advantage of these buying opportunities and prepare to potentially earn much higher returns in the future. While I know it’s impossible to predict exactly when a downturn will occur or when stock prices will bottom, I still believe that preparing for a crash by preparing to invest more is a good strategy.
For these two reasons, I put a lot more money in my brokerage account and less in my savings. I hope it will pay off for me in the end. I think so, because I know that my current level of savings is sufficient and that investing as much as possible for the long term should help me grow my wealth over time.
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