We’ve been hearing about the latest Inflation report ending at 2.7% for the past year, a little over the Reserve Bank’s expectation of 2%. But what really is Inflation and how does it affect your investments?
Inflation is the increase in price for commodities over a period of time. The effects of Inflation become clearer once it is compared with other factors, one of which is the country’s currency. A sudden spike in inflation can cause values of goods to rise drastically, as opposed to a modest level that usually denotes a healthily growing economy.
For property investors, inflation has a huge effect on your spending power. The current rates on savings accounts and the rate of inflation have become smaller. Because of this, the rate of return is greatly affected. A sudden increase of inflation can cause your investment’s value to outperform the investment’s growth causing negative gains.
It is important to understand the impact of inflation to your investments, as this has a direct effect on the market value of your investments.
Read more about this on the My Wealth News website.
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