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is likely that you could do better than 3% with your investments. If that’s the case, why pay extra on your mortgage or car payment? The ideal scenario is to outperform inflation with your money. The stock market can be a great way to do that. Based on long-term historical averages, stocks have easily outperformed inflation. Certain sectors perform exceptionally well during periods of inflation. Commodity producers, energy companies, agricultural companies and raw materials producers have shown historically strong earnings and, thus, increased stock prices during inflationary periods. As shown above, the government has policies in place to control rising inflation. This doesn’t mean that you can’t take some action on your own. Stockpiling cash in your bank account or keeping a large amount hidden under your mattress is almost never
the answer. The stock market experiences bear markets and bull markets, but remember, you don’t lose money until you sell.
In closing, I’d like to mention that inflation should be on your radar. I don’t anticipate that we will see inflation similar to what we saw in the 70’s and 80’s because that can be blamed on failed monetary policies. We now have contractionary monetary policy to fall back on that has proved to be a successful method in controlling inflation. However, I wouldn’t sit back and allow the government
to take the reins. There are ways to grow
your wealth and potentially make inflation irrelevant to your lifestyle. Perhaps the most effective way to hedge against inflation is to let your money grow for you.
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