Financial Planning Fridays #86: Stay Ahead of Inflation

The price of a postage stamp is set to increase, yet again, to 73 cents in July 2024. In 1963, it was 5 cents. It has become almost 15 times more expensive over the past 60 years!

This postage stamp chart serves as a great proxy for everything we purchase and just how important it is that our investments stay ahead of this. 


Historically, the best way to not only keep up with this inflation but to grow your real wealth over time is by making long-term investments in stocks. 

This chart shows the average annual returns of stocks, bonds, and cash over the past 5, 10, 15, and 20 years. Only stocks have had a real positive return during that time. Investments held in bonds and cash have actually resulted in less real purchasing power over the past 20 years. 

While this can be an especially difficult decision when we have the temptation of money market funds or Treasury Bills paying us more than 5%, this is exactly why it is so important to keep the majority of your long-term investments in stock and only use bonds and cash for short-term goals, or as an emergency fund. 

To provide additional perspective, going back to 1963 and our 5-cent stamp, an investment in bonds would have doubled your real wealth since then. 

However, an investment in the S&P 500 would have grown your wealth by more than 42 times. A return that would have given you and your family a lot more purchasing power!

In our minds, it isn’t risky being invested in the stock market over the long-term. The real risk is not being invested in stocks and allowing inflation to eat into your purchasing power over time. 

Be on the lookout for our next Financial Planning Fridays episode. Subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.