Many people do not seem to have fully grasped the extent of current inflation. Otherwise, there would not be several billion euros in the accounts of this country.
The consequences in the medium and long term are clear to all. At some point, savers will have to say goodbye to their zero-yield savings account and explore other options. For example actions.
A wave of inexperienced investors has rarely done the stock market any good. But this time everything could be completely different, and there could even be a great opportunity for retirement.
Inflation does not have a happy ending
The numbers don’t lie. An inflation rate of 5.1% was measured in Germany for February 2022. The Ukraine crisis could further exacerbate inflation. Some experts already forecast an inflation rate of 10%.
Specifically, an inflation rate of 10% means that if you now have 10,000 euros in your account, you will have to swallow a loss of purchasing power of more than 60% after ten years. 10,000 euros becomes 3,855 euros. No happy ending!
With 0% inflation and 0% interest you say to yourself: OK, good. With 2% inflation and 0% interest, slight doubts arise. But with 10% inflation and 0% interest, even the most staunch passbook savers are likely to hit the barricades.
The Internet has also changed financial education
In this way, a situation can easily arise that we have often experienced before the great stock market crises. Millions of inexperienced investors flock to the stock market and buy anything that doesn’t come out in three. Not out of greed this time, but out of fear of inflation.
All alarm bells should now be ringing for experienced investors. It is not so with me. In my opinion, the current situation is not comparable to 1929 or 2008.
If you are reading this, you have proof. I don’t think I’m exaggerating when I say that the Internet has also radically changed financial education.
Today, every kid can get first-class information on stocks, finances, and more with minimal effort and minimal cost. Information that stock market legend Warren Buffett had to dig deep into 50 years ago.
Ironically, the scourge of savers could usher in a century of stock market culture
At the same time, the range of financial products is greater than ever. There is no longer just “the part”. There are over 1,200 ETFs to choose from on the German market alone. With exchange traded funds, you can get pretty much any flavor in your portfolio.
I wish there could never be an MSCI World ETF as broad and global as a single company. The average return of 7% per year can’t beat a 10% inflation rate, but it can at least cushion it a bit.
If we’re lucky, inflation could turn into a good thing for the first time in its disastrous history. And a stock market culture without stock market crash and long faces.
The information is there. The products are there. Savers just have to strike.
In a few decades it will be seen whether inflation may even have saved the old-age provision. It would be possible!
The article Why Inflation Could Be a Big Opportunity for Retirement Savings first appeared in The Motley Fool Germany.
Motley Fool Germany 2022