Yes, inflation has been trending lower, but it is still with us. Even a two percent rate will erode the value of your savings. Then, there are the inevitable bouts of much higher inflation. Gold is now about $2,500 an ounce. (Remember $300 – $400 an ounce?) This says much more about our U.S. dollar than it does gold. Compare a starter home price or the cost of a new car today with one 20 or just 10 years ago. You can see that there has been a massive decline in the value of our dollars.

An important part of investing is keeping up with or staying ahead of this erosion. There are few ways of doing this that are accessible to the average person. Surely, one way is owning a solid home in a desirable neighborhood. Not all real estate is equal, so quality and location really matter. The problem for many young buyers today is that the down payment is very difficult to come by.

The U.S. stock market is another good way to beat the inflation problem. This is easier for many because virtually any amount can be used to get started. Additions can also be made in almost any increment. If you have any doubt about this process, look back at the returns for the popular stock market averages over any reasonable time frame. These are the annualized gains:

5 years 15.83%
10 years 13.07%
15 years 14.26% *

Impressive, yes? Certainly, these returns more than offset inflation; they created wealth! There are many good ways to go about participating in these returns. Obviously, there are down periods, but the effects are usually soon erased as our economy and the returns for participating in it power ahead. Be positive and stay steady my friends.

– The Lonely Bull

*As measured by the S&P 500 Index