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How to protect yourself from inflation: what is it?
Inflation is a index which allows us to understand what the purchasing power of a currency.
It basically refers to value of money.
Even if it seems strange to you, money does not always have the same value: it’s up to you purchasing powerthat varies over time.
Another indicator to consider is amount of money circulating in a particular country: the more money there is, the lower its value, the higher the inflation rate.
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Doing two examples to understand more.
The first concerns the general increase in prices: this causes a decrease in the average purchasing power of the population. Simply put, what used to cost 1 euro may now cost 2.
If the increase in prices does not coincide with an increase in wages, we have a increase in inflation.
The same thing happens when a nation decides to invest money in its financial market which, therefore, does not come from commercial transactions.
For a very simple market law, if a product is very present, its value falls. Actually, the rarest goods are also the most expensive.
The the same reasoning must be done with money: the more it circulates, especially in liquid form, the higher the inflation rate will be, as a result of which its value will decrease.
If at a particular historical moment there is a price increase andvaccination of new moneycan create a situation that the poverty rate is rising significantly of the people.
Fortunately there are ways to defend yourself from inflation, let’s see what’s in the next chapter.
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How to protect yourself from inflation: the best methods
Let’s check how to protect yourself from inflation describing some simple tricks. But let’s start with one Bad news: Keeping money at home is the worst idea ever.
This money, in fact, will be subject to inflation and in less than a decade it would lose much of its purchasing power.
In addition, let us not forget that risk of theft: a “visit” of thieves is enough to see all the savings disappear.
The better alternatives on how to protect yourself from inflation are:
- Investing in safe havens: such assets guarantee a steady increase in their value, so that future conversion into money allows for profits. The most famous is gold.
- Limit fluidsAs mentioned, the more cash you have, the greater your exposure to inflation.
- Invest: it is not difficult to invest money now. Of course, we must always be very careful, but there are possibilities that guarantee excellent security margins, such as bonds.
- Invest in real estate: brick is always a great choice to ensure the growth of one’s assets. If you have some money to spend, consider buying a house or an apartment. Keep in mind, however, that there are more attractive areas, and therefore it will increase the value of the property in a few years. Others, on the other hand, risk seeing the value of the home fall because of the location, neighborhood or area where they arise. So, even here, maximum attention.
The last tip to learn how to protect yourself from inflation is to vary.
Do not commit ithis mistake trust your money in a single investment solution. Better Divide your savings into small pieces and invest them in different products. Doing so will greatly reduce the risk of getting into trouble if something goes wrong: you may make a mistake in an investment, but you will have others guaranteeing your profits.
Finally, if you have doubts ask a specialist that can guide you to the best choices.