Inflation protection
The Impact of Inflation and Smart Investment Choices
Inflation is a global issue that affects many countries, and everyone should pay attention to it. Inflation doesn’t only increase the prices of goods and food; it can also reduce the value of money saved in a bank account. Sometimes, the interest rate offered by the bank is not enough to keep up with inflation, or it provides too little return.
You can calculate the real return on your investment by using the formula: Real Return = Nominal Return — Inflation Rate.
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For example, let’s say you invest in a 10-year U.S. government bond, which has a yield of 4.406% per year (source). If the inflation rate is 3% per year, the real return can be calculated as: Real Return = 4.406% — 3% = 1.406%.
This means the real return on this investment is 1.406% per year.
Keeping money in a bank account might not always be the best option, but I’m not suggesting that you shouldn’t save at all. Saving is still better than spending frivolously. However, it might be more beneficial to invest part of your savings in safer stocks or mutual funds that offer better returns. When choosing stocks or mutual funds, it’s important to consider risk and select investments with moderate risk levels that can offer returns higher than inflation.
Examples of long-term investments in stocks that are good options include SCBS&P500, ASP-DPLUS, KT-ENERGY, and KF-HCHINAD.
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Investing involves risks, please do your research before making any investments.
