As we all know and have experienced firsthand, inflation is the number one enemy of financial wealth. In other words, it makes the money in your pocket vanish like a sugar cube in coffee. This is why having an efficient investment plan is so necessary. Most people have more or less fixed incomes from jobs or rent. We also keep cash on hand for unexpected expenses. All that liquidity is constantly eroded by inflation.
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If inflation is low, it's much less noticeable, but if you do the math, you'll see that its cumulative effect is terrible. It's the harmful version of compound interest. We could call it compound inflation.
Whatever your investor profile, you'll always have to fight against inflation, whether with bonds or stocks. Even if you use the lowest-risk asset in the world, your goal should always be to outperform inflation because otherwise, your wealth will decrease over time. When developing an investment plan or entrusting one to a wealth manager, inflation must be taken into account when assessing risk. In a Western country, a minimum of 3% annual inflation should be projected over the long term as a benchmark, and risks should be assumed accordingly to meet personal objectives.
Disclaimer.
This is not a purchase recommendation. I am not a regulated financial analyst. Under no circumstances should this information be construed as a recommendation to buy, sell, or hold a position.
You should be aware of the risks involved in investing and conduct your due research.
The information described here may not be accurate or may change at any time, so you should always check it.
