Managing the Effects of Inflation

Inflation is a reality we all must contend with, but many fail to recognize the potential impact it can have on a long-term investment plan.

Inflation risk can be simplified as the loss of buying power due to continually increasing prices. A retiree on a fixed income—one that does not increase—may eventually run into a deficit as his or her expenses continue to grow. For someone with long-term investment goals, such as saving for retirement, achieving a rate of return that exceeds the rate of inflation is important.

Over the last twenty years, prices have risen at an average annual rate of 2.85%¹. As a result, it would take about $175 today to purchase the same amount of goods that $100 purchased in 1988.
But which investments will have the potential to beat inflation? While it is impossible to predict the future, we can look at which investment categories have outpaced inflation in the past.