There are various types of investment risks, but one that is often forgotten about is ensuring that one’s investment is growing enough to beat inflation (6%).
Allan Gray explains in their latest Allan Gray Quarterly report, time is what allows our investments to grow. But because the prices of goods and services increase (this being inflation), time can also erode our money. This is why it is important to be invested in the right portfolio that suits your needs.
It is important to understand the nature of the risks you face so that you can make the right choices. Those who cannot deal with volatility will opt for a more conservative approach, which will bring steady returns but then one needs to ensure that these returns keep up with inflation. Those investors that have a more aggressive approach and who can tolerate risks need to ensure that they have a long term investment goal in mind.
If one is investing for retirement or a living annuity, inflation must be taken into account when looking at asset allocation as well as withdrawal rates. They say, your money needs to continue to grow enough to be able to support your lifestyle over time and help you cope with rising costs.
The key to successful investing, is making the right choices. Talk to us today to ensure that your investment is one that suits your investment needs.
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