After one of the worst start to the year for equity investments, you may find your self asking WHY?
Why do I bother? Why do I subject myself to this angst, only to see my invested capital decline? Why not just put it in cash and take all my worry away? Why invest, when I could have done better year-to-date in 2022 stuffing it under my mattress?
The answer is actually a word that is top of mind these days – inflation. Inflation (ie: the increase in prices over time) erodes the purchasing power of a dollar as time progresses. As you can see in the below chart (courtesy of Charlie Bilello at Compound Advisors most recent newsletter), the value of the dollar has eroded over the years – and the stock market has not only kept pace with rising prices, it has exceeded them.
Does this mean stocks always keep pace with inflation? Absolutely not. There’s no such thing as a perfect inflation hedge – as we all know by having lived thru 2022 thus far. But in the last hundred years, there has been no better way to generate real wealth than by investing in stocks – and staying in over time
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