April 28, 2014
Inflation risk is a deadly monster that eats away your savings little by little. How can you counter its affects?
Inflation risk is a deadly monster that eats away your savings little by little. How can you counter its affects?
Inflation risk is the most potent with money in the bank, because the cash in the bank normally will not be able to keep up with inflation, stocks on the other hand are a good hedge to inflation, they will normally go up at a rate that is greater then inflation and even sometimes will go up due to inflation making the stocks more valuable in dollar terms. Its important to remember that there are no risk free investments and the money in the bank or cash accounts are affected by inflation risk the hardest. If you dont want to take the rish of stocks Bonds and REITS can give you other options to make inflation less of an issue, bonds will still be affected by inflation at a greater rate but will usually have a better return then cash. The more you can learn about this the better off you will be.
You covered the issue quite well, Garrett. Let’s review.
Inflation eats up your money little by little. Over many years and decades, it will shrink your money in some very dramatic ways. Garrett had it right. Take your savings and invest in appreciating assets that grow over time, striving to stay ahead of that monster we call inflation.
You can do this with bonds, Real estate, and stocks. I encourage you to do it at the lowest possible cost and that means no-load index mutual funds at a place like Vanguard. Here is the bottom line: your money is either growing or shrinking. Make it grow!