This month, Equitas’ KnowRisk is dedicated to a discussion of inflation. In these uncertain times for investors, it is vital to understand what inflation is, how it can affect a portfolio, and some of the best ways to ensure that its negative impact on your investments is mitigated as much as possible. In explaining and examining the effects of inflation, we hope that you will gain a greater degree of understanding as to how inflation not only affects investors in terms of the return on their investments, but also as a factor in calculating what returns profile they need in order to retain and increase their purchasing power over time. With that in mind, let’s take a look at what inflation is at the most basic level.
INFLATION, AT HOME AND ABROAD
Fundamentally, inflation is simply the inevitable increase in the price of essentially everything that we buy and sell over time. When your grandmother used to regale you with tales of purchasing a gallon of milk for a nickel, she was complaining about the effect that inflation has on prices. All economies are affected either by inflation or deflation of prices at any given time, and it is a vital consideration when constructing any investment portfolio. While recent inflation figures from the United States government have many investors concerned, it’s worthwhile to take a quick look how inflation works in the rest of the world.
As you can see, while American inflation numbers ( 4.2%) currently exceed those in the developed economies of the Eurozone countries (3.7%) and Japan (.8%), they are equal to those of Australia, and considerably lower than many of our most important trading partners, including Mexico (4.95%), India (6.02%), and China (7.70%). On the higher end of the scale, American inflation is less than a third what Russia is experiencing ( 15 .1 % ), and even smaller when considered in light of Venezuela’s (31.4%) rate of inflation.
In 2002, Equitas Capital Advisors, LLC was established as a unique company that blends the resources of a large global corporation with the flexibility of a small boutique firm. The registered service mark of Equitas Capital Advisors is Engineering Financial Solutions® and the purpose of Equitas is to design, build, and deliver investment solutions to meet the goals and objectives of our investors. Equitas Capital Advisors, LLC located in New Orleans, has over 200 years of combined investment management consulting experience providing professional investment management services to investors such as foundations, endowments, insurance companies, oil companies, universities, corporate retirement plans, and high net worth family offices.
Disclosures and Disclaimers:
Above information is for illustrative purposes only and has been obtained from reliable sources but no guarantee is made with regard to accuracy or completeness. It is not an offer to sell or solicitation to buy any security. The specific securities used are for illustrative purposes only and not a recommendation or solicitation to purchase or sell any individual security.
Equitas Capital Advisors, LLC is registered as an investment advisor with the U.S. Securities and Exchange Commission (“SEC”) and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.
Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author on the date of publication and are subject to change. This publication does not involve the rendering of personalized investment advice.
Charts and references to returns do not represent the performance achieved by Equitas Capital Advisors, LLC, or any of its clients.
Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses.
All investment strategies have the potential for profit or loss. There can be no assurances that an investor’s portfolio will match or outperform any particular benchmark. Past performance does not guarantee future investment success.