More is better, right? Just ask Clark Griswald in the popular holiday movie, "National Lampoon's Christmas Vacation." Has there ever been a home with more Christmas lights than the Griswald's? The "more is better" attitude tends to find its way in to everything we do, and the way we manage our money isn't immune. (For more, see Traders: Work Less, Make More Money.)

If you believe the experts, you have to have a retirement account full of complicated investments, another account with stocks and bonds, and a savings account for those unforeseen emergencies. Before you rush to your broker, let's see if the statistics hold up. Are you really making that much more money following the more (action) is better philosophy?

IN PICTURES: 20 Lazy Ways To Save Money

Mattress vs. Bank
Believe it or not, there are still people, a lot in fact, who keep their money in the form of cash, hidden at home. Some believe that traditional banks are dangerous if they were to go out of business. Aside from the fact that the risk of fire or theft at home is far more likely than losing your money at a bank, there are two main reasons that your money is better off in a bank. (For more, see Are Your Bank Deposits Insured?)

First, consider the interest. Although that December 2010 1% interest rate doesn't seem like much, in the future, it's likely to increase. And even if it didn't, it would still be a better rate than your mattress is giving you. Second, the interest is compounding. Compounding is simply the interest you make on the additional money you made due to interest. The cycle continues over and over and this results in a lot of money over time.

IN PICTURES: 5 "New" Rules For Safe Investing

Mattress vs. Apple
What would have happened if you invested your $5,000 in Apple (Nasdaq:AAPL) back in 1985? Today, your $5,000 would be over $500,000! Of course, very few people would have had the investing prowess to hang in there with a stock for 25 years, but even if you looked at 2010 alone, investing in Apple is a much better rate of return than your mattress.

It's also important to remember that if it were easy to select a winning stock like Apple, everybody would. It's far more likely that you will own a moderate performer. Still, a moderate performer would return an average of 9% (appreciation and dividends) over the past 25 years.

Mattress vs. an Index
When we look at an index, we're talking about a collection of stocks. The most well-known index is the probably the Dow Jones Industrial Average. This is a collection of 30 stocks that is used to represent the performance of the stock market as a whole. In December of 2000, the Dow Jones Industrial Average was at 10,635. In December of 2010, it was at 11,410. Over the course of a decade, this is a gain of 7.29% or less than 1% per year.

In this case, we could say that even the slightest amount of gain is better than the no gain provided by your mattress, but maybe not. In these 10 years, the Dow Jones dropped to as low as 6,600 representing a nearly 40% loss. Once again, unless you were a skilled investor with quite a large tolerance for risk, at some point you probably would have pulled your money out of the stock market and taken some amount of loss. Since the financial meltdown of 2008, many people are still avoiding the investment market in favor of abysmal gains in a savings account. They would rather make less and know that their money is safe. (Learn more in Why The Dow Matters.)

Mattress vs. Gold
Maybe you have never been the stock market or savings account type. Instead, you prefer to have something to show for your riches so you purchase gold, perhaps in the form of a gold bar or some nice looking jewelry. You paid $5,000 for your gold and you purchased it five years ago instead of keeping your money under your mattress.

You know the answer to this one: you're rich! Your $5,000 purchased 10.22 ounces of gold 5 years ago. Today, it's worth $14,480. (For more, check out 8 Reasons To Own Gold.)

The Bottom Line
The big Wall Street banks and the 2008 financial meltdown are enough to convince most people that their mattress is safer. However, when money is left in an investment vehicle for a long period of time, the patient investor will make money. In this case, the mattress is a bad idea.

For the latest financial news, see Water Cooler Finance: FBI Insider-Trading Bust.

Related Articles
  1. Mutual Funds & ETFs

    The ABCs of Mutual Fund Classes

    There are three main mutual fund classes, and each charges fees in a different way.
  2. Investing Basics

    5 Common Mistakes Young Investors Make

    Missteps are common whenever you’re learning something new. But in investing, missteps can have serious financial consequences.
  3. Chart Advisor

    ChartAdvisor for February 5, 2016

    Weekly technical summary of the major U.S. indexes.
  4. Mutual Funds & ETFs

    The 4 Best American Funds for Growth Investors in 2016

    Discover four excellent growth funds from American Funds, one of the country's premier mutual fund families with a history of consistent returns.
  5. Products and Investments

    A Guide to DIY Portfolio Management

    These are some of the pillars needed to build a DIY portfolio.
  6. Fundamental Analysis

    Performance Review: Commodities in 2015

    Learn how commodities took a big hit in 2015 with a huge variance in performances. Discover how the major commodities performed over the year.
  7. Investing

    What Investors Need to Know About Returns in 2016

    Last year wasn’t a great one for investors seeking solid returns, so here are three things we believe all investors need to know about returns in 2016.
  8. Stock Analysis

    The Biggest Risks of Investing in SandRidge Stock

    Learn about the significant risks of investing in SandRidge. Read how the company may not be able to service its substantial debt load.
  9. Mutual Funds & ETFs

    The Top 5 Buffalo Funds for Retirement Diversification in 2016

    Discover the top five Buffalo Funds for retirement diversification in 2016, with a summary of each fund, including manager and performance information.
  10. Chart Advisor

    These 3 ETFs Suggest Commodities Are Headed Lower (COMT,CCX,DBC)

    The charts of these three exchange traded funds suggest that commodities are stuck in a downtrend and it doesn't look like it will reverse any time soon.
RELATED FAQS
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Does mutual fund manager tenure matter?

    Mutual fund investors have numerous items to consider when selecting a fund, including investment style, sector focus, operating ... Read Full Answer >>
  3. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  4. Why do financial advisors dislike target-date funds?

    Financial advisors dislike target-date funds because these funds tend to charge high fees and have limited histories. It ... Read Full Answer >>
  5. What licenses does a hedge fund manager need to have?

    A hedge fund manager does not necessarily need any specific license to operate a fund, but depending on the type of investments ... Read Full Answer >>
  6. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center