Inflation 2024: How to protect assets sensibly

I had to smile, because Uncle Heinz is one of those people who stopped believing in investments in the 80s. “Well, Uncle, I’m not surprised about the savings account. You know inflation is like an invisible thief that slowly but surely makes your money shrink.”

“But what should I do now?” he asked thoughtfully. “Mark, you know your way around! How do you protect yourself from it?”

The impact of inflation: why smart investments are essential

“Quite simply,” I replied, “inflation means that your money is worth less every year. So the purchasing power of your money decreases because you get fewer products or services for the same amount of money than before. Inflation rates can be influenced by various factors, such as increased commodity prices, labor costs or excess demand. If you don’t invest your wealth, it will be eroded by inflation, especially if you look at inflation trends in 2024, no matter how hard you’ve worked for it.” Of course, my uncle was all ears. “So I have to do something, don’t I?” he asked eagerly. “Exactly,” I confirmed. “If you don’t invest your money, you’ll lose a lot of purchasing power in the long term and suffer a certain loss in value due to rising inflation.

Let me give you a small example: If you have CHF 100′000 today and don’t invest the money, inflation will eat away around 2.4 % of your assets every year on average. After 10 years, you will still have CHF 100,000 in your account, but prices will have risen by a good 26% in the meantime. That’s why you no longer have to pay CHF 100,000 for the same products or services, but a good CHF 126,000.

“That’s frightening,” said Heinz as he thought for a moment. “But what exactly should I do now to protect my finances?”

Inflation 2024: Strategies to protect your assets with tangible assets

“Fortunately, there are various solutions,” I explained to him. “To protect your assets from the current inflation in 2024, it’s important to invest in real assets. However, you shouldn’t just focus on individual investments, but diversify your portfolio broadly – preferably across different markets and sectors.” Heinz asked thoughtfully: “How can I make sure I’m not taking too much risk?” “That’s exactly the point,” I continued. “Instead of focusing on individual stocks or risky sectors, it’s smarter to make sure you have a balanced mix. For example, you can invest in a portfolio of quality companies from different sectors such as IT, healthcare or energy, or in high-quality bonds and gold. With this strategy, you can minimize your risk while benefiting from long-term stability. A wealth advisory service at Point Capital can help you find the right investment solutions for you and tailor your portfolio to your needs.”

The big difference: investing versus inflation in 2024 – how to avoid losses

A simple calculation: “Imagine you invest your money for 20 years without earning interest and compare it with an investment that yields a gross annual return of 6%. The difference is enormous. You lose almost 40 % of your purchasing power in 20 years without interest due to annual inflation. In Germany it is even more than 40 %. The situation is different with a balanced investment: An investment with a 6% return over 20 years, minus inflation, effectively doubles your assets – adjusted for inflation.

So remember one thing above all: if you don’t invest your money, you will certainly lose value through inflation. If you invest cleverly, you not only protect it, but also increase it.” Heinz laughed quietly and said: “Great, so I’ll have to do more than just keep an eye on my savings book.”

Diversified investment strategies: the key to financial security despite inflation in 2024

Finally, I said to him: “You know, Heinz, the best way to invest is with a broad, diversified investment strategy. Spread your money across different asset classes, shares and bonds. The most important thing: stay patient. It always pays off in the long term, especially in view of inflation in 2024. You’ll see that time will play into your hands.”

Yours, Mark Stock©

Note: The inflation rates mentioned are based on the average inflation rates for the years 1960 to 2023 in Switzerland/Germany.

Mark Stock is a member of the Point Capital editorial team. “I am a stock market enthusiast and am passionate about economic history. I have been following the ups and downs of the markets for years and, of course, invest myself – preferably in shares. So my name says it all. Every month, I take up what I consider to be an exciting topic. And since the focus is on the content and not on me personally, I write under a pseudonym.”