High-Yield Savings vs. Stock Market: A 5-Year $10,000 Investment Experiment
When it comes to growing your money, two popular options are high-yield savings accounts (HYSAs) and stock market investments. But which one comes out ahead over time?
In this post, we’ll compare two strategies:
- Putting $10,000 in a high-yield savings account (4% APY) and adding $100/month
- Investing $10,000 in the stock market (NASDAQ or S&P 500) and buying $100 in stocks each month
We’ll project the results over 5 years, using historical averages and recent performance trends.
Option 1: High-Yield Savings Account (4% APY)
A high-yield savings account offers low risk and steady growth, making it ideal for short-term savings goals. Here’s how a $10,000 initial deposit with $100 monthly contributions at 4% APY would grow over 5 years:
- Initial Investment: $10,000
- Monthly Contribution: $100
- Annual Interest Rate: 4% (compounded monthly)
- Total Contributions After 5 Years: $16,000 ($10,000 + $6,000 in deposits)
- Projected Balance After 5 Years: ~$18,082
Pros:
✔ Guaranteed returns (no risk of loss)
✔ Liquidity (easy access to funds)
✔ Predictable growth
Cons:
❌ Lower long-term growth potential
❌ May not outpace inflation
Option 2: Stock Market Investment (NASDAQ or S&P 500)
The stock market has historically delivered higher returns but comes with greater volatility. Let’s examine two major indices:
A. Investing in the NASDAQ Composite
- Historical Average Return: 9.366% annually (last 45 years, with dividends reinvested)
- Recent Performance (2025): -10.42% YTD (showing short-term volatility)
Projected Growth (Assuming 9.366% Average Return)
- Initial Investment: $10,000
- Monthly Contribution: $100
- Total Contributions After 5 Years: $16,000
- Projected Balance After 5 Years: ~$21,500
But what if returns are lower?
If the NASDAQ underperforms (e.g., 5% average return), the balance could be closer to ~$18,900.
B. Investing in the S&P 500
- Historical Average Return: 10.13% nominal, ~6.37% inflation-adjusted
- Recent Performance (2025): -13.42% YTD
Projected Growth (Assuming 10.13% Average Return)
- Projected Balance After 5 Years: ~$22,100
- With 6.37% inflation-adjusted return: ~$19,800
Key Takeaways: Which Performs Better?
| Strategy | Projected 5-Year Balance | Risk Level |
|---|---|---|
| HYSA (4% APY) | ~$18,082 | Low |
| NASDAQ (~9.37%) | ~$21,500 | High |
| S&P 500 (~10.13%) | ~$22,100 | Moderate |
Who Should Choose HYSA?
- You need stable, accessible funds (emergency savings, short-term goals).
- You can’t tolerate market downturns.
Who Should Invest in the Stock Market?
- You’re comfortable with volatility for higher long-term growth.
- You’re investing for retirement or long-term goals (5+ years).
Final Thoughts
- High-yield savings are safer but grow slower.
- The stock market has higher growth potential but comes with risk, especially in the short term.
Diversification is key! Consider splitting your strategy—keep some cash in an HYSA for stability while investing the rest for growth.
What’s your preferred approach? Let us know in the comments!
Want personalized financial advice? Visit NPPSC.com for guidance on savings and investments!
Disclaimer: This is not financial advice. Market returns are not guaranteed. Past performance does not indicate future results. Always consult a financial advisor before making investment decisions.