5. Equities Help Protect Purchasing Power
There’s a quaint charm when your grandfather recalls how he could see a movie for a dime as a boy. But there’s also an unpleasant reality there called inflation. Those who ignore it by failing to invest in assets with the potential to beat inflation may be facing a very unpleasant surprise. History shows that equities have outpaced inflation by a significant margin over the long term.
Investing to Combat Inflation
Inflation, by definition, drives prices up and pushes the purchasing power of your saved money down. While not much attention has been paid to inflation since the early ’80s, recent fiscal concerns have many wondering how much inflation will impact our economy in the years ahead. Stocks, despite their recent travails, have done the best job of providing returns after inflation is taken into consideration.
The Bottom Line
- Over time, inflation shrinks buying power.
- Historically, stocks have generated better total returns after inflation than bonds, gold and cash equivalents.
- It's important to remember that while stocks have historically outperformed other asset classes over the long term, they can fluctuate dramatically over the short term. Investors should be comfortable with fluctuation in the value of the investment.
- Speak to a financial advisor for help creating an investment plan with the goal of protecting purchasing power.
Another reason to be an equity investor: History Favors a Return to the Mean
Are You a Financial Advisor?
Register for our Advisor Website——or——
Sign In for more on 2020 VisionYou need Adobe Acrobat Reader 6.0 or higher to view and print PDF documents. Download free version from Adobe's website.
For U.S. residents only.