October 12, 2014
What is inflation risk and why should you care about it? What can you do about it?
What is inflation risk and why should you care about it? What can you do about it?
Inflation risk is the risk that your money has just sitting somewhere, you will always have it and it is unavoidable but you can do some things to make it less of an issue. You should always try to beat inflation and strive for a real return. You want an interest rate that is better then inflation or ateast keeps up with it. Cash in the bank or in a mattress will be eaten away by inflation over the years. Inflation normally runs about 3% so you will need to be making over 3% to come out ahead. You can own stocks that get on average over 3% so you make a real return after inflation.
Right again, Garrett. Let’s review.
Inflation is the monster you never see, but he is there at every turn taking a bite out of every dollar as the years go on. Listen to Garrett when you are trying to grow your money. You want a positive real return on your money. That is the nominal return – inflation rate.
Focus on investing inexpensively in no-load index mutual funds that own stocks and bonds from all over the world. The monster will lose his power over YOUR money as you apply this approach.