Avoiding the silent erosion of wealth
Staying invested not only helps capture the rewards of economic recovery but also combats the silent erosion of wealth caused by inflation.
Inflation is unlikely to repeat the low and stable trajectory of the past few decades, as shifts such as climate change and changes in demographics can apply upward pressure on inflation. Geopolitical tensions can also be inflationary through costs incurred from increased defence spending and nearshoring (moving business operations to nearby countries).
Therefore it is important that client’s investments offer a degree of confidence to beat inflation even during uncertain times.
Let’s consider an example for a parent hoping to help their children pay towards a house deposit in the UK in 30 years’ time. A £10,000 investment in a diversified multi-asset fund such as the Prudential With-Profits Fund would’ve given the investors increased financial power to afford a higher deposit for a house in the UK.
Keeping the money under the mattress or in a piggy bank would offer a worse outcome since the value of £10k 30 years ago would still be £10k today, but an average house price would have jumped from £52k to £259k over the 30 years!
The value of an investment can go down as well as up and your clients may get back less than they’ve paid in. Past performance is not a reliable indicator of future performance.
