Inflation is a hot topic as of March 2022 for good reason. Recently Bloomberg reported the highest CPI (Consumer Price Index) increase in nearly 40 years at 7%. The CPI is a way to track the cost of normal everyday things that people are buying, and a good measure of how much more expensive life is becoming for the average consumer.
The real cost of inflation is the reduction in the purchasing power of your cash and savings. For example, let’s imagine you have exactly $1000 in the bank (which is considered to be cash) and the inflation rate is 7% like it is today. If you were to simply keep that cash in the bank for 1 year, the prices of all the things you normally buy will increase 7% on average while your cash remains the same. What would have cost you $1000 on January 1st would cost you $1070 on December 31st later that year.
Although there is lots of blame being cast for why this is is the case, let’s focus on the facts at hand; inflation is here and we don’t foresee it slowing down for quite some time. How do we protect our savings from losing its purchasing value?
Due to the fact that inflation means that the cost of goods and services is rising, the best protection is to actually purchase those goods or services! So for example, if you were to buy 1000 candy bars for $1, after a year they would (hypothetically) be worth $1070! Although candy bars sound like a great idea, they are not considered a “good” investment because they aren’t good stores of value. It’s hard to actually show that candy bars will give you a return on the money you’ve invested. So what is a good investment?
More common assets that are popular hedges against inflation are things like Stocks, Rare Metals, and Real Estate! Although it’s become easier to invest in stocks in recent years through fractional investment on platforms like Robinhood and others, Real Estate remains a difficult asset to purchase without having a high income and lots of savings. Unlike stocks, when you purchase real estate you need to spend time, energy, and more money actually managing the property. With the stock market, you leave the running of the company to its executives and employees!
Fundhomes is giving every investor access to Real Estate with the same level of commitment as owning a stock. With as little as $50 you can start to own fractional shares of Real Estate rental properties and earn dividends as well as appreciation in order to protect your savings from inflation!
Although it’s important to protect your cash from inflation, it’s also important to recognize that investing carries risks. You can never be 100% certain that your investments in any market will make money, and they could potentially lose value. Make sure to do your due diligence and invest responsibly and only what you can afford!