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Chow Mein or Fried Rice
Written by Steve | Published: |
Where we live there is a Panda Express less than a mile away. I’m not a big fan of the restaurant personally but it is a hot spot for the teenagers because they jump on their bikes and utilize a bit of their indepence by going without their parents and buying their own food.
I guess it’s kinda fun for them.
When you go in there the first thing you have to do is choose between the chow mein and the fried rice. Honestly this is a struggle for some of them.
I would say if this is your toughest decision of the day then you are doing pretty well for yourself. Ha ha ha.
The talk about inflation has been non-stop for a long time now. Goes to show that the Fed cannot just do what they want and print trillions of dollars without consequences for all of us.
In the chart below it gives some context to inflation by comparing the median price of homes to a 100lb bag of rice.
If you created a storage facility of rice in 1970 and held it until the current day. Based on these numbers you could nearly buy two homes just by holding the amount of rice from back then.
So my groundbreaking investment tip for the day is go down to your local grocery store and buy up as much rice as possible.
Ok, maybe not.
What I do want to stress is that inflation is a real thing. If you aren’t holding assets that appreciate with or outpace inflation. Then you are going backwards.
For example, let’s say you have $100k in the bank. In a year from now you will still have the $100k in the bank however, with the current inflation rate that they tell us of 6.5% (*hint it is much higher than that). Your same $100k will only buy you $93,500 worth of goods next year.
Your purchasing power is being diminished.
The only thing worse than this is if your asset values are going down at the same time.
In other words if you lost 33% last year (as many did…some much more) add the inflation rate on top of that.
That’s an almost 40% decrease in purchasing power.
And do you know how much you would have to earn this year to recover and get back to where you were?
It’s not 40%…
It’s actually 67%.
There is a disproportionate loss effect where losses have a larger effect on your wealth compared to gains.
This is one of the many reasons why as you approach retirement you must protect yourself from the downside risk while at the same time outpacing inflation.
If you don’t know your effective risk score, it may be time to dive in and take a look at that.
Until then, go for the chow mein and add a bit of soy sauce, you can thank me later. 🙂
