The big­gest threat to your sav­ings

Finweek English Edition - - MONEY -

Mar­ket risk is not the big­gest threat to your sav­ings. In­fla­tion is. In­fla­tion is the pow­er­ful force of com­pound­ing work­ing against you. In­fla­tion works in an ex­po­nen­tial way, erod­ing your cap­i­tal while you are not even aware of it. It is also not an im­mi­nent threat and so won’t cause a heart-pump­ing rush of adrenalin. Other than not sav­ing enough, in­fla­tion is the big­gest cause of run­ning out of money in re­tire­ment. Costs grow ex­po­nen­tially. If your in­vest­ments are not struc­tured to fight in­fla­tion, you will move back­wards in re­tire­ment.

The only as­set classes that beat in­fla­tion con­sis­tently over the longterm are eq­ui­ties and prop­erty. (Re­mem­ber that you can in­vest in th­ese as­set classes through unit trusts and re­tire­ment prod­ucts.) Th­ese as­set classes re­quire you to take on mar­ket risk.

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