If you want to build wealth for your future – you’ll find that these days picking coupons may be a better bet than picking stocks.
Coupon cutting received a bad rap in the past. Many people saw it as an activity just for “the cheap.” But the activity has become much more common in the mainstream over the last few years, as well as a lot easier, with more and more discount opportunities being distributed online.
Finding discounts is easier than ever
Now with sites offering coupons, discounted gift cards, and other opportunities, you can find ways to save on your daily spending without a lot of labor and headache. You can even get personalized offers based on your actual spending.
To many people starting to make long-term investment decisions, coupon-cutting may seem to be a trivial aside. On closer inspection, however, a few minutes everyday spent gathering online offers could provide greater returns than the same time poring over chat rooms and tickers online, preparing for stock trades.
Daily savings add up to a lot over time
First of all, coupon savings can be significant – the average savings available per person is around $1,535, according to the Inmar 2013 Coupon Trends report. While you wouldn’t be able to access all this value, with reasonable effort, you can probably save at least 20% - 30% on your groceries, which is worth over $100 per month for most families.
An extra $100 in savings a month could increase the average American’s retirement savings by one third. If we look at what a similar boost could do for an American’s retirement wealth, the results are impressive. According to Putnam Investments, just bumping monthly retirement contributions by one third (3% to 4%), could have meant an extra $45,000 at retirement for someone who started to save in the early 1980s.
In comparison, according to Putnam, someone predicting the future perfectly, who switched her money from the worst mutual funds to those that would perform best in the market each year, would only have increased her retirement holdings by $30,000 over the same period. Saving more has a huge impact on future returns.
Picking individual stocks is probably a losing battle
Meanwhile, a wealth of research suggests that even experienced fund managers are usually unable to beat broad baskets of stocks when they actively pick stocks. Small-time investors also typically perform worse when they try to guess which stocks will be future superstars. To the contrary, as they trade stocks more actively, investors often hurt themselves significantly, incurring expensive trading costs and paying more in taxes.
So do yourself a favor – take a few minutes to scan some discount sites before you go shopping, and put your extra monthly savings in a well-diversified, low-cost investment fund. Forget the trading sites and online stock-picking gurus. Your time is better invested finding ways to save.