Even low inflation rates can pose a threat to investment returns.
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When we talk about inflation, we’re not talking about filling a hot air balloon. Inflation is a rise in the general price level of goods and services which erodes the purchasing power of a dollar.
Though inflation has been under 5% for more than 20 years, it wasn’t always that way. Many of us remember the high inflation rates of the ’70s and early ’80s.
Even low inflation rates can pose a threat to investment returns. If your fixed income investments have a 3% annual rate of return, but inflation was 2% over that same period, your real rate of return was only 1%.
The Federal Reserve’s monetary policymaking team meets eight times a year to monitor the economy, including the rate of inflation. Fed policy can have an effect on economic growth and, as a result, the rate of inflation.
What is the real rate of return on your current investments? Don’t let inflation take the air out of your investment portfolio. Call today and let’s talk about it.
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