During higher inflation, cash is no longer king. In what will you invest?

Assume 5 years of 5% inflation and 4% interest. The $10,000 in your savings account has grown to $12,167. Nice! But there is a problem. With this $12,167 you can buy only as much as you could buy 5 years earlier with $9,414. You have not become $2,167 richer. You have become $586 poorer.

Inflation is like a tax. It takes away every year a part of your savings and wealth.

Why You Have to Invest During High Inflation to
Protect Your Savings

A period of high inflation is a complex period for you as investor. During high inflation, not investing will kill your savings and wealth. You have to invest. To keep your wealth and life savings in cash is not a good option.

Inflation is the rise in the general level of prices. It means that the same amount of money has now less purchasing power than before. Thus your $10,000 savings buys you less than before. To be able to maintain the same standard of living, you need more money than before.

An inflation of around 2% per year is according to economists a desirable rate of inflation. It means that next year you would need $102 to buy the same things that cost you $100 this year.

During High Inflation, You Can Only Grow Your Wealth
When Cash is not Your King

Inflation becomes a problem for the average person when the prices are raising faster than that the income and the returns on savings are rising.

When inflation is 5% and your savings account only pays 4% interest, you lose every year 1% of the purchasing power of your savings. Even you get more money on your account; you still can do less with it then before.

Therefore holding your savings and wealth in cash is something that you want to avoid during high inflation. In normal times can cash be king. But during high inflation, you can only grow your wealth when you invest your cash wisely.

If you are interested to know in what assets you can invest best during high inflation, here is now a report that tells how you can grow and protect your savings in periods of inflation, hyperinflation or deflation.