Look at the US inflation data , over 50 years, on a yearly compound basis, it needs roughly 4.5% annual rate to counter the effect. This is higher than simple time deposit. In China, counting from the economic reform, the case may even be worse.
It's too simple a calculation and world is more complicated. But anyway, inflation is an important issue when considering your investment. Most mutual funds and high return financial products have positive correlation with inflation.
Several ways to add some inflation protective to your portfolio.
Treasury bills, bonds or CDs are basic choices. They are especially useful when you have certain financial target to meet such as children's education expenses. Of course, the target may rise with inflation as well.
Gold is another choice. According to data, the actual purchasing power of gold over 50 years is doubled. This roughly equals to 5.5% annual rate. However, gold itself is more volatile and entry time is more important.
Mutual funds should be also taken into consideration. In the disastrous 2002, the gold and resources funds are winners. Compared with the asset linked, they are less volatile and compared with fixed-income products, they are usually with a higher return.
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