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Storing your money in a high yield savings account or US Treasurys can largely avoid this being a problem, according to historic data. E.g. https://www.morning
by javagram 5y ago
Storing your money in a high yield savings account or US Treasurys can largely avoid this being a problem, according to historic data.
E.g. https://www.morningstar.com/articles/998988/cash-as-an-inflation-hedge https://www.morningstar.com/articles/998988/cash-as-an-infla...
> Cash as an investment--meaning cash that is held in an account--behaves differently. It appreciates in nominal terms, because of compounding. If placed into one-month Treasury bills, and reinvested, three 1933 dollars would now be worth $54. What once could purchase 100 first-class stamps currently buys 98 stamps. Roughly speaking, reinvested cash preserves purchasing power. The reason to hold riskier assets is not to protect against the damage caused by inflation, because reinvested cash does that, but instead to grow one's wealth.
- gruez 5y ago>according to historic data. How applicable is that today? QE has tanked rate of return on bonds/savings accounts to below inflation. In many european countries interest rates on savings accounts are zero or even negative.
- javagram 5y agoWe haven’t seen sustained inflation in a long time. If inflation is sustained at a high rate, expect to see interest rates on T-bills (and hence also savings accounts) soar as well.
- boublepop 5y agoCurrently “high yield” savings accounts have negative interest rates. So not much help compared to putting everything in the market and hoping there isn’t a major crash.
- javagram 5y agoReal negative but still nominally positive and guaranteed never to go down, that’s a big difference from putting all your money in the stock market. Were inflation to be sustained it’s likely HYSA interest rates will go back up too - that’s the general historic trend.