My nine-year-old car has banged-up hubcaps. Whenever I pass some spiffy new car with gleaming, fancy wheels that must have cost the owner at least $4,000, I think to myself: "That's enough for a Roth IRA contribution. I wonder whether that person made one."

I think about my money, which is invested in stocks and mutual funds that will grow in value over time, and then I think of the other driver's money, which is invested in wheels that will probably lose value over time. And I conclude, admittedly in a smug fashion, that my money is in a better place.

Sure, the thought that this money is better than that money is a bit ridiculous. There's an old saying that money doesn't know who owns it -- and Gertude Stein would probably agree that a dollar is a dollar is a dollar.

Still, I think there is a way to think about how some dollars are more attractive than others.

When my money is better
Here's how my money can be better than yours. Let's say that you and I both need to buy a new car, and we each have $40,000. You buy a $40,000 car. I buy a $20,000 car and invest the remaining $20,000 in the stock market.

Cars tend to lose 15% to 20% of their value each year. So in five years, your $40,000 car is worth about $15,600 -- you'll have lost $24,400 in value. My car, meanwhile, is worth $7,800 -- I'll have lost $12,200. Looking at the money we spent on cars, I'd say my money was better spent. (I know that there are more considerations, but let's assume that we both aim to save and invest as much as we can for our retirement.)

Now, assume I invested my other $20,000 in a handful of stocks, such as Coca-Cola (NYSE: KO) and Procter & Gamble (NYSE: PG). Over the past five years, Coca-Cola stock has advanced by about 70%, while P&G's stock has gained 65%. That averages out to about 11% per year, enough to turn my $20,000 into more than $33,000.

Here's a look at what $10,000 can turn into, parked in various places over 10 years:


Average Annual Gain (Loss)

After 10 Years

New car



Coffee can buried in yard



CDs at bank



Broad-market index fund



Above-average mutual fund



Way-above-average stock



It's good to remember the effects of inflation, which my colleague Doug Short illustrated starkly in "The Millionaire Delusion." For example, that money buried in your yard will total $10,000 after a decade, but it won't have the same purchasing power then as it does today. If inflation averages 3% per year, its purchasing power will be reduced to around $7,400.

But even though finding a stock that will return an annualized 16% per year is aggressive, I don't believe it's out of the question. Target (NYSE: TGT) has averaged about 17% annually over the past 20 years, while Intel (Nasdaq: INTC) has averaged just shy of 18% and Apple (Nasdaq: AAPL) has averaged 16%. (The exact period of your investment matters: Apple's average over the past decade alone has been 38%.) Not every big name will excel, of course. For instance, respected brands such as Ford (NYSE: F) and Advanced Micro Devices (NYSE: AMD) have fallen more than 50% over the past decade. (Always try to avoid retirement killers.)

Your money can be better
Of course, your money may end up better than mine -- it's the long run that really matters, after all. You may already be investing more successfully than I am, or maybe you'll get a wake-up call soon and will end up stashing some top-notch mutual funds in your retirement accounts.

It's important to realize that if you're parking your money -- which is a precious, limited commodity -- in places where it won't serve you well, then you should examine your decision-making process. You especially want to make sure not to leave it in places where it loses rather than gains value. This is critical stuff, and it can make the difference between a comfy retirement and one, well ... like this guy has.

Again, it may be silly to think of any dollars as better than any other dollars, but remember that money can do all kinds of things, good and bad. Most of us should be aiming to have our dollars help us grow wealthy. Think about all of the self-made millionaires out there -- they got to where they are by making smart decisions with their money. They saved aggressively, invested effectively, took calculated business risks, showed frugality with their funds, and tended to be patient. We can all do that, too.

We at the Fool would love to help you. I enjoy reading our Rule Your Retirement newsletter service, which distills vital information into a concise monthly package and even offers stock and fund recommendations. It also has interviews with people who retired early -- and explains how they did it. Try it for free for 30 days, and see what you think -- you'll have full access to all past issues during that period, too.

Longtime Fool contributor Selena Maranjian owns shares of Coca-Cola. Intel and Coca-Cola are Motley Fool Inside Value picks. Apple is a Motley Fool Stock Advisor selection. The Motley Fool is Fools writing for Fools.