New Investor's Guide to Inflation & the Inflation Rate

Understanding the Rate of Inflation and Your Portfolio

If your investments earn 7% after taxes but the rate of inflation is 4%, your gain in "real" net worth is only 3%. That is why it is so important for you, as an investor, to understand inflation, how the rate of inflation influences the value of your portfolio, and what you can do to protect yourself against a high inflation rate. This guide will walk you through the basics and give you some things to consider.

01
What Is Inflation?

Dollars flow
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Take a look at inflation, not as a purely economic concept, but as a practical, applied concept from the perspective of a portfolio owner.

Through that lens, inflation refers to a unit of currency depreciating in value so that it takes more currency units to buy the same amount of goods and services as ​in the past. 

02
What Causes a High Rate of Inflation?

Inflation isn't some magic potion that takes a Ph.D. to understand. The causes of a high rate of inflation are actually fairly simple. Take a few moments to learn the two causes of inflation and it can go a long way in giving you peace of mind.

03
3 Ways to Protect Your Portfolio from a High Inflation Rate

You don't have to just lie down and watch inflation take away your years of hard work. There are some steps you can take to protect your savings! Here are three of the more popular strategies for protecting your assets from inflation.

04
What Are the Effects of Inflation?

There are a handful of tell-tale effects of inflation that, once you understand, can be useful to you in developing an investment strategy.

05
What Is an Inflation Index?

You know that inflation is bad for your portfolio. You know that inflation is bad for your paycheck. But how, exactly, do economists measure inflation? They use something known as an inflation index. Although the math is complicated, the concept isn't.

06
Why Haven't We Seen Inflation, Yet?

A lot of new investors wonder why—with the government printing money and running huge deficits—we aren't we seeing huge inflation now. The answer has to do with something called the M1, M2, and M3 money supply, which is much simpler than it sounds.

07
One Trick for Estimating the Expected Inflation Rate

There is a trick used by professional investors to estimate the rate of inflation the market is expecting in the future. This can be useful in your financial planning. It is short, simple, and involves subtracting two numbers from one another.

08
Series I Savings Bonds

Investors concerned about a rising inflation rate might want to consider Series I Savings Bonds, which are a special type of investment that actually pays more interest income to their owners when inflation rises and less when inflation falls!