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Consider the impact of inflation on your investments from "summary" of Investing Basics for Beginners by Razaq Adekunle
When investing, it's important to keep in mind the impact that inflation can have on your investments. Inflation refers to the general increase in prices of goods and services over time, which means that the purchasing power of your money decreases. This can have a significant effect on the returns you earn from your investments. For example, if you have a savings account with a fixed interest rate that is lower than the rate of inflation, the real value of your money is actually decreasing. This is because even though you may be earning some interest on your savings, the rising prices of goods and services mean that your money won't go as far as it used to. Inflation can also impact the performance of other investments, such as stocks and bonds. While these investments have the potential to offer higher returns than a savings account, they are still vulnerable to the effects of inflation. If the rate of inflation outpaces the returns on your investments, you may find that your purchasing power is eroded over time. To account for the impact of inflation on your investments, it's important to choose investment options that have the potential to outpace inflation. This might include investing in assets that historically have provided higher returns, such as stocks or real estate. It's also a good idea to diversify your investments across different asset classes to help mitigate the risk of inflation eroding the value of your portfolio. In addition, it's important to regularly review and adjust your investment strategy to ensure that it remains aligned with your financial goals and the current economic environment. By staying informed about inflation rates and making strategic investment decisions, you can help protect the value of your investments in the face of inflationary pressures.
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