How to protect your money from inflation?

During inflation, money loses its value and purchasing power, and so does the saved assets. How to protect your money from inflation?

The term inflation comes from the Latin word “inflame”, which means “flatulence”. So when there is inflation, the amount of money in circulation goes up – it goes up. But the more money is in circulation, the less purchasing power it has. That the purchasing power of money decreases slightly from year to year is perfectly normal and even desirable – 0 to 2 percentage points is perfectly acceptable.

However, we currently record an inflation rate of around 3.4% (June 2022). This huge increase in prices means that the population can afford less and less. While low inflation rates can still be easily compensated by interest rates and wage increases at work, the current high rate is challenging for us – can you still protect your money?

Consumers experience high inflation every day, for example in a supermarket or at a gas station. But the depreciation of the Swiss franc is noticeable not only in everyday life – assets are also shrinking.

This can be seen in a very simple calculation example: anyone who parked 10,000 francs in a savings account in June 2021 still has 10,000 francs on paper. But those 10,000 francs are now worth much less. As an owner, you can buy 3.4% less goods and services in June 2022. The purchasing power of 10,000 francs has therefore dropped to around 9,660 francs in a year.

Compared to neighboring European countries and the US, inflation is still manageable in this country. But Switzerland is also on a historical level and investors are concerned about their wealth.

Telephone money accounts and other fixed interest investment models provide only a limited solution. Even if the ECB is slowly moving away from its low interest rate policy, interest rates on deposits are nothing more than a drop in the ocean.

How can you protect your assets from falling in value?

With stock market investments against inflation

Basically, investors only have one way to preserve the purchasing power of their wealth. You need to choose investments with returns that match or exceed the rate of inflation. The stock market is also quite turbulent at the moment, but it could mean good deals for newbies because: Who buys cheap and ultimately sells dear makes a profit. However, trading in the stock market is complex, so you should be well informed in advance. explains the different prices in the stock market, but what should investors consider to protect their money from inflation?

save capital

Everyone dreams of making better use of their money. However, in times of above-average inflation, the first step is to save your capital value. This is especially possible for real estate and gold – both are considered to be solid and largely crisis-proofed assets of value. Skillful investments can preserve the value and thus the purchasing power of money.

But what if you dream of multiplying your capital despite inflation?

increase capital

Even in times of inflation, it is possible to multiply your capital efficiently. However, investors need to be smart and ideally to get a good deal of knowledge about the stock market. This is the best way to determine what type of investment is particularly profitable today.

You should also make it clear whether you are looking for short term, medium term or long term gains. Depending on the investment horizon, different investment strategies and financial instruments are appropriate.

Beware of stagflation and refllation

The two terms stagflation and resflation are artificial terms. Stagflation occurs when there is not only inflation, but also stagnation of the economy – the indicator is the rising unemployment rate. If an economy is not only stagnating, it is actually contracting, it is called a recession. If inflation occurs during a recession, it is called a recession. If this is the case, governments can react with tax cuts to re-energize the economy.

Even in the phase of stagnation or contraction of the economy, there are financial instruments that can be lucrative for investors – incl. B. Derivatives where you can bet on not only rising but also falling prices. However, this type of investment requires a lot of knowledge and practice.

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