Consider the impact of inflation on your investments, as inflation can erode the value of your capital over time.

Consider the impact of inflation on your investments, as inflation can erode the value of your capital over time.

Inflation is a measure of the increase in the general price level of goods and services in an economy over a specified period of time. It has a direct impact on the purchasing power of money, as the same amount of money will buy fewer goods and services in the future due to inflation.

In the context of investments, inflation is an important factor to consider as it can erode the real value of your capital over time. This means that if the return on your investments is lower than the rate of inflation, the actual value of your investment will decrease.

For example, let's say you have invested $100 in an investment that provides a return of 5% per year, while the inflation rate is 3%. Although your investment has grown by 5%, its real value has only increased by 2% as the other 3% has been offset by inflation.

Therefore, when developing an investment strategy, it is important to consider the impact of inflation on your investments and to seek investments that provide returns that are higher than the rate of inflation. This will help to ensure that the real value of your investment is protected over time.