Historically, different investments or asset classes have achieved different rates of return over different time periods. Although past performance does not guarantee future results, when you compare the returns on common stocks, bonds, and cash, common stocks have had a competitive rate of return over a long period of time.
When you work on your retirement investment strategy, one of the key issues is the rate of return you expect to earn on your money.
Cash and/or cash alternatives, which may provide safety of principal and pay interest, have provided the lowest long-term rates of return. If your risk tolerance is low, you'll need to assume a relatively low rate of return on your investments when you do your planning.
Likewise, if your risk tolerance is higher and you have a long-term time horizon, investing in common stocks or stock mutual funds will offer the potential of a higher rate of return.
IMPORTANT NOTE: All performance referenced is historical and is no guarantee of future results. No strategy assures success or protects against loss. Stock and mutual fund investing involves risk, including possible loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will likely decline as interest rates rise and bonds are subject to availability and change in price.