While CD’s and money markets are making significantly more now than they were just 2 years ago, 5-5.5% still isn’t a whole lot, especially if you consider inflation and have a desire for growth. The answer to how to make a better return might seem obvious, but it is true: take more risk.

CD’s and money markets are about as low risk of an investment as possible, since nobody
knows for certain what the future holds, and they practically guarantee interest payment.  The
downside is that since the risk is so low, the return reflects that. In the same way, if you were to
take a calculated risk and buy some good stocks or mutual funds your risk would increase, but
your return would as well (as long as you buy the right ones).

The thing about risk is it is highly customizable — you don’t have to buy 1000 shares of
GameStop in order to see your portfolio do well. Let’s take an example of someone who has a
low risk tolerance, but they decide to get a little bit of exposure to the stock market. This person
may fit into a 40/60 portfolio, that will include 40% stocks and 60% bonds. In tough markets like
we saw in 2008, 2020 and 2022, a person fully invested in the S&P 500 would have been down
57.4% (10/11/07-3/6/09), 35.6% (2/19/2020-3/23/2020), and 27.47% (1/4/22-10/13/22). These
are big swings, and some, especially like the first one, can make even the most seasoned
investors shaky. However, if someone was using a 40/60 strategy, they would have only been
down 22.18%, 16.46% and 13.33% at the very worst times in those bad markets.

On the other hand, coming out of the bad markets they would have reaped 28.01%, 42.45% and
20.83% respectively in the 18 months following the low point, which dwarfs the rates from a CD
and money market. In conclusion, taking some risk can help you make more money. If managed
properly you can ride out the lows in the market and come out on top over the long haul.