Equities for Income?
The following page contains two charts that can help you make wiser decisions to keep your income growing.
Six Month CD Rates
Figure 8.1: CD Rates 1/1/75 through 12/31/00.
Source: Federal Reserve Board
CDs are federally insured up to $100,000 and offer a fixed rate of return, whereas both the principal and yield of investment securities will fluctuate with changes in market conditions.
Figure 8.2: Growth of Dividends for S&P 500.
Source: American Funds
Index, 1978 = 100, data 1/1/78 through 12/31/00. Notice that rates on fixed income securities, as measured by CDs, has fallen since the early 1980s. Dividends from the S&P 500, however, have increased consistently.
It may be counterintuitive, but your best source of growing income may be from the stock market and not from fixed income investments.
