30 years ago, aged 16, I knew I’d be a millionaire one day.
It wasn’t because I had my career mapped out or an amazing invention tucked up my sleeve.
I understood how inflation worked. And how it would destroy the value of money given enough time. Don’t believe me? Ask anyone 55 years or old.
Watch them shudder.
In a single word “inflation” is the reason why money you don’t need in the immediate future must be invested.
That £1,000,000 in 1988 is now worth £375,000.
In my village, in 1988, £1,000,000 bought you the castle. With a moat, drawbridge, swans, out buildings, a dozen or so bedrooms, battlements, the works.
£375,000 gets you a two bed flat in Loughton, Essex. Hardly millionaire’s row is it?
30 years is important.
It’s about the number of years you need to fund yourself after you stop working.
We’re assuming you want to maintain your standard of living?
Then your investment strategy must offset both your income needs and inflation. Otherwise your savings will dwindle in no time.
Here are the after inflation returns since 1900 for a globally diversified portfolio as shown in the Credit Suisse Global Investment Returns Yearbook 2017:
| ASSET CLASS | ANNUALISED RETURN |
| Equities | 5.1% pa |
| Bonds | 1.8% pa |
| Cash | 0.8% pa |
Equities returned nearly three times as much as bonds and over six times more than cash.
Using these historic rates, over 30 years, £1m in equities would become £5m, £1.7m in bonds and £1.2m in cash.
The results speak for themselves. You have zero chance of maintaining your lifestyle via bank savings. And next to no chance of doing so investing in bonds.
With these so-called “safe” investments you are signing up for impoverishment or hoping you die young. That’s nonsensical.
The only way to be sure of beating inflation and getting the income you need is investing in a diversified portfolio of the most successful companies around the world. The facts speak for themselves.
Inflation means PERMANENT loss. You avoid this PERMANENT loss by accepting the TEMPORARY setbacks that occur with equities (click here for more on this).
Which strategy would you pick? Which one have you picked?