Silent killer: How inflation ravages your rand
It’s known as an investor’s worst enemy and the silent assassin of savings. It has even been called “public enemy number 1”. All these unflattering titles belong to inflation.
A 6% inflation rate will almost halve the value of your money over 10 years — turning, for example, R10,000 into R5,584. After 20 years, your R10,000 will lose 70% of its purchasing power and be worth only R3,118, according to Old Mutual Investment Group.
This is why we need our investments to deliver returns that outperform inflation — what’s known as a “real” or inflation-adjusted return.
“Inflation is the most important index,” Zain Wilson, portfolio manager at Old Mutual Investment Group, said. He said SA has a high inflation target compared with the rest of the world.
The following examples from the “Long-Term Perspectives 2019” report, published by Old Mutual Investment Group, illustrate the impact of inflation on our everyday lives...