In financial planning, inflation is largely overlooked by a lot of people when peering down the road twenty or thirty years. The entire financial advisor industry is very aware of this planning mistake and is quick to point out that a $1 doesn’t buy what it used to. While inflation was a run-away problem during parts of the 70’s and 80’s, it has largely been maintained at a target of about 2.5% increase annually. Controlled inflation is desirable and keeps things moving forward for both for consumers of goods and services and for the businesses that make, sell, or provide those goods and services.
Back in 2008 and 2009 when there was tremendous financial stimulus by the government, there was also tremendous concern that “printing all that money” would lead to rapid inflation. It didn’t, or at least hasn’t yet. In 2020, we find ourselves in the middle of another set of stimulus rescue packages, and again, there is growing concern to what that means for inflation. Well informed economists will argue both sides, but in the end, only time will tell what inflation will really mean to the future purchasing power of your $1. Certainly, inflation and those actions that contribute to inflation are beyond your control.
The solution to combat inflation, regardless of how big of a headwind it may become, is within your control. Quality investments like stocks and mutual funds or vehicles that allow you to participate in equity markets have proven over and over again to out-pace inflation allowing your future purchasing power to grow instead of shrink.
If you are too nervous to risk your money in types of investments that move up and down with the traded markets, please allow us the opportunity to introduce you to ideas where you can be protected from market losses, but still participate in some of the market gains.
As we all continue to endure this marathon of social distancing and adjusted lifestyles, our team hopes you and your loved ones are healthy and finding ways to make the most of the situation. If you and your loved ones are doing reasonably well, I encourage you to seek out those that are not, and do what you can to help or encourage them. Unfortunately, we all know folks who have been largely impacted medically or financially by COVID 19.
Click HERE for the Weekly Market Review
As always, if we can help or serve you, please reach out and let us know.
Sincerely,
Trevor N. Coe, CFP®