Provided by Taylor McClish
The real rate of return is an important personal finance concept to understand.
It’s the rate of return on your investments after inflation. The real rate of return indicates whether you are gaining or losing purchasing power with your money.
So with inflation checking in at a 5% annual rate, does that mean any investment with less than a 5% rate of return is losing purchasing power?1
That’s where it gets a little complicated.
In theory, any investment with less than a 5% rate of return may lose purchasing power. But the financial markets are giving mixed signals about how long they expect inflation will stay at its current level. Fed Chair Jerome Powell has indicated that the inflation numbers we are seeing won’t be long lasting and can be attributed to improving economic conditions.2
In the end, the real rate of return is only one factor to consider when building a portfolio. Your time horizon, risk tolerance, and goals are the primary drivers.
We
work with financial professionals who monitor inflation to determine whether
it’s here to stay or whether it may start to trend lower. But if inflation is
starting to worry you, please reach out. We’d welcome the chance to hear your
thoughts.
Taylor McClish may be reached at (503) 239-3060 or Taylor.McClish@cunamutual.com
Oregonians Financial Planning Website
Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.
This material was prepared by MarketingPro, Inc. for use by Taylor McClish
Investing involves risks, and investment decisions should be based
on your own goals, time horizon, and risk tolerance. The return and principal
value of investments will fluctuate as market conditions change. When sold,
investments may be worth more or less than their original cost.
Citations.
1. CNBC.com, June
10, 2021
2. CNBC.com, May
3, 2021
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