October 2012, an online search to find the current rates of a bank Certificate of Deposit (CD) resulted in yearly rates varying from 1% to 1.75% (5 year CD). Instead of socking away money into a CD, a person could buy shares of British Petroleum (BP) in the stock market. Today, one share of BP costs $41.73, and yields a quarterly dividend of 48 cents (1.15% of the share price). Hence, it is possible to exceed the 5-year return on a CD in only 6 months by collecting dividends in the stock market. While this may sound like a dream to some, the one thing worth noting is that none of the money invested in the stock market is guaranteed. If the company goes bankrupt or experiences a disaster of some type, the original money you have invested may be lost or take years to recoup. Do you remember reading about the stock market crash in 1929 starting the Great Depression? On the other hand, the price of the stock may rise and you may hold a higher value than what was invested.

I would venture to say that investing in the stock market is a “safer” bet than investing in the local casinos or state lottery system. However, everyone should do their own research on the amount of risk they can handle in the market and/or consult with a financial planner. I am in no way advocating whether a person should invest in the market or CD accounts. My intent is only to mention that there are financial options available, and everyone should further research the options that best suit their goals and risk tolerances. At the time of writing, I do not hold any shares of BP. However, I do wonder about the performance (or lack of) of my 401k.

-M