Omega Management logo

What causes inflation – Forbes Advisor Australia

Even a moderate rate of inflation means that money held as cash or in low-interest bank accounts will lose purchasing power over time. You can beat inflation and boost your purchasing power by investing your money in certain assets.

Beat Inflation with Stocks

Investing in the stock market is one way to potentially beat inflation. While individual stock prices may fall or single companies may go out of business, and bear markets may even depress indices for certain periods, broader stock market indexes rise over the long run, beating inflation.

From 1920 to 2020, the S&P 500, which tracks the performance of 500 of the largest companies in the US, generated an average annual return of just over 10%, with dividends reinvested. This is a long-term average—in some years, the S&P 500 had lower or even negative returns.  In Australia, the long-term return—about 30 years—on Australian shares averages out at just under 10%….

Read more…