Motley Fool NINE FACTS YOU NEED TO KNOW ABOUT INVESTING

Sometimes it just takes a number or two to deliver a life changing realization.  

• You may be more prepared for retirement than you think.Say, you have only $75,000 socked away for retirement, and you are already 45. You have a lot more saving and investing to do in order to build a comfortable retirement. But, you are still above average. Fifty-three percent of American workers have saved less than $25,000 for retirement (excluding the value of their home), and 35% have less than $1,000 saved. 

• You can probably amass much more money than you think. If you have 30 years until retirement and you can sock away $8,000 per year that grows by an annual average of 8%, you can accumulate close to $1 million. You have only 20 years until retirement and can sock away $10,000 a year growing at 8% annually, you will end up with close to $500,000. 

• It is kind of easy to outperform most managed stock mutual funds. An inexpensive, broad market index fund is likely to outperform most managed stock mutual funds. For example, the S&P 500 outperformed about 80% of large cap stock funds over the decade concluding at the end of June, 2015. 

• Dividends can turbocharge your investing. A study of Russell 3000 companies dating back to 1992 found dividend payers returned about four percentage points more per year, than the average non-payers, when weighted equally. Between 1927 and the end of 2012, reinvested dividend income made up 42% of large cap returns, 36% of mid cap returns and 31% of small cap stock returns. 

• Day trading or excessively active trading can wreck your returns. The most active traders reaped the lowest returns. Indeed, between 1992 and 2006, 80% of active traders lost money, and only 1% of them could be called predictably profitable. 

• Inflation can cut your purchasing power in half. Over the long haul, inflation has averaged about 3% annually. That number may not seem bad, but over 20 years it is enough to give $100,000 the purchasing power of just $54,000. 

• Do not count on your home as an investment. Think of your home as a comfortable place to live, but not necessarily a great investment. A Nobel-prize-winning economist’s data suggest that housing prices have grown at a compound annual rate of just 0.3% over the past century (inflation-adjusted), while S&P 500 has averaged roughly 6.5%. 

• Stocks rose 1,100-fold over the last 70 years. Over the last 70 years, the S&P 500 advanced 1,100-fold, which is enough to turn a single modest $1,000 investment into more than a million dollars. Consider that statement in light of the many double-digit market crashes, recessions, and even the Great Depression. The lesson: over the long haul, stock markets tend to rise, not just in a straight line. 

• You can slash your tax rate nearly in half by being a long-term investor. The capital gains rate on short term investments (those held a year or less) is the same as your income tax, which is 25% for most people and 28% for higher earners. On long-term capital gains, though (from assets held for more than a year), most people will face a tax hit of just 15%.

Put these statistics together, and the conclusion is clear. Have a retirement plan where you save diligently and invest effectively, perhaps in index funds, dividend paying stocks, or both. Beware the erosive power of inflation and steer clear of day trading. Enjoy your house, but do not plan on it making you rich, and be tax smart by aiming to invest for the long term. Not so foolish.