Inflation. The slow erosion of purchasing power is a big deal for investors. After all, inflation is the reason why a dollar buys less these days than back in, say, the 1950s. The negative effects of inflation can be pretty devastating for savers.
Or at least it used to be that way.
Over the last few years, inflation has been mostly nonexistent – thanks to a slow-moving economy, low interest rates and abundant supplies of various goods/materials. Worrying about inflation may actually be a thing of the past. According to a new thought piece by asset manager Vanguard, technology is placing the erosion of purchasing power on the back burner. Perhaps even permanently.
For many investors, this completely changes the way we build our portfolios to account for inflation and its effects.
Check out our new and improved Dividend Screener to find high-quality dividend stocks.
Where’s the Price Rise?
Historically, inflation has been a big problem for savers and investors over the long term. According to Trading Economics, the United States has seen inflation rise at an average of 3.28% from 1914 to 2017. At that rate, something that cost $100 in 1914 would cost about $2,375 now. That staggering jump over the past hundred years is exactly why investors and savers have reason to be afraid of inflation.