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Combating inflation

Discussion in 'Investing Strategies' started by legionx, 7th Sep, 2010.

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  1. legionx

    legionx Member

    Joined:
    22nd Jun, 2008
    Posts:
    6
    Location:
    Adelaide, SA
    Hi All

    Does anyone actively combat inflation in their investments by increasing their contributions each year to match the eroding inflation rate?

    Thanks,
    Colin
     
  2. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
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    Location:
    SE Queensland
    Hi legionx

    Inflation is when the purchasing power of a currency diminishes. If you had 3% inflation per annum, $103 would buy at the end of the year what $100 would buy at the start. Soley adding money to an investment does not combat inflation. Your assets' combined growth and dividends have to be higher than inflation.




    Johny.
     
  3. legionx

    legionx Member

    Joined:
    22nd Jun, 2008
    Posts:
    6
    Location:
    Adelaide, SA
    Oh ok, so if the projected return of a managed fund is hypothetically 10% over 20 years the "reality" is it is 10% - 3% = 7% of 20 years, and then even less again because of capital gains taxes.

    Sorry this should probably be moved to the uber beginners forum :)
     
  4. huale768

    huale768 New Member

    Joined:
    13th Sep, 2010
    Posts:
    3
    Location:
    usa
    Inflation is when the purchasing power of a currency diminishes. If you had 3% inflation per annum, $103 would buy at the end of the year what $100 would buy at the start. Soley adding money to an investment does not combat inflation. Your assets' combined growth and dividends have to be higher than inflation.Does anyone actively combat inflation in their investments by increasing their contributions each year to match the eroding inflation rate?
     
  5. huale768

    huale768 New Member

    Joined:
    13th Sep, 2010
    Posts:
    3
    Location:
    usa
    Inflation is when the purchasing power of a currency diminishes. If you had 3% inflation per annum, $103 would buy at the end of the year what $100 would buy at the start. Soley adding money to an investment does not combat inflation. Your assets' combined growth and dividends have to be higher than inflation.Does anyone actively combat inflation in their investments by increasing their contributions each year to match the eroding inflation rate?



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