A common question we have been getting, with inflation running at nearly all-time highs: “How do I find a way to hedge against inflation over my lifetime?”
Inflation is interesting because in a lot of ways it’s labeled as “the silent killer”. It’s the thing that takes away the most value of your assets over time, especially if you’re not investing them appropriately.
I think one of the best ways to look at inflation is by reviewing the price of stamps over time. It’s interesting that in 1972, the price of a stamp was ten cents. And in the year 2022, the stamp was at sixty cents. So over the span of 50 years, the price of stamps went up six times, which is a significant amount of money. Of course, we can extrapolate that over to the other areas of our financial life, whether it be rent, cost of groceries, cost of gas - all of that has expanded over time and grown with inflation.
Now this isn’t meant to upset you or make you feel like it’s hopeless to keep up, because it’s not. Because historically, if we were to look back over that same time period, investing in the stock market and upholding those investments, the past 50 years would have returned far more than what inflation did over that time period. Stock markets averaged over 10% a year in that time period.
So if we’re really trying to keep up with inflation, one of the best hedges, of course, is equity stock investments. While they may go up and down, sometimes down more often than up in certain years, over time, they’ve grown substantially and created a way for you as an investor and as a retiree to keep up with inflation.
I would always suggest making sure you have a sound investment strategy built by a financial planner. When reviewing that plan, keep in mind that even in your retirement years, inflation is still something that you need to plan for and keep up with over time.