Investing money correctly with inflation

How inflation arises

If the demand for goods is higher than the overall economic supply, prices will rise. At some point, wages and salaries also have to be raised to prevent social unrest. But if you have more money in your pocket, you want to buy more, so demand rises even further – and prices climb with it. An inflationary spiral is set in motion. And with interest rates still very low. You get next to nothing for your money at the bank, you have to pay even more. In addition, the Fed in the USA and other central banks have flooded the markets with a veritable glut of money in the past. What are the consequences for anyone who wants to invest money?

Inflation eats up assets

The answer is unpleasant, but simple: inflation destroys your money. When prices rise, your assets melt à la longue like butter in the sun. It is no coincidence that loss of purchasing power is also considered an important 'ingredient' in a dangerous cocktail that can have a toxic effect on private investors. The other two ingredients are 'war' and 'monetary tightening measures'. And how can I protect my money?

Under no circumstances should you sit back and relax. Because if – in the best-case scenario – the inflation rate in Switzerland remains at 2.4% per year, the loss over the next ten years will be 32% on average. After ten years, you would only have CHF 680,000 left from one million francs. If the German inflation rate of around 7% is applied permanently for the same period, your assets would even be halved and one million would only be worth around 508,000 euros.

A sound investment strategy is the right response to challenges in times of many question marks and ups and downs on the stock markets. One thing is certain: in the long term, equities generate percentage returns that are higher than the inflation rate. They also demonstrably offer the highest returns compared to other asset classes. But which shares should you invest in?

Buying shares: the right investment strategy

Above all, active portfolio management is important. This means systematic risk management in which, for example, part of the assets are reallocated to defensive equities or invested in other asset classes in times of crisis. For example, we also use good old gold as a diversification element in our multi-asset strategies.

In general, we at Point Capital consistently focus on quality securities in our investments. Such investments tend to perform better even in a difficult market environment.