Is it true that you have to make about 5% return on investment just to keep up with inflation?

Question

If so, what investments will beat inflation?

Answer 1

Five percent is a good number, but it does vary from year to year. Three to four percent is a more conservative number, but in the past there have been some years that inflation was double digits!

If you are looking for a long term investment, the stock market has averaged about 10 percent. Naturally this is not for short term or necessary funds (like savings). Mutual funds is an easy way to become invested in the market without having to be an expert. An index fund is a good choice. It buys stocks that mimic the well-known indexes (like the Dow Jones) and usually these funds have low operating costs. I would stay away from funds with loads (front of back). Do your research, and you should be good.

Answer 2

Inflation has been running below 3% for a number of years now, so a 5% investment will easily keep up with inflation.

Answer 3

Ther stock market and real estate are the only investments that over the long term will earn significantly more than the rate of inflation.

Answer 4

Not exactly.

1. You need to earn the a rate of return that is equal to the inflation rate.

2. If the return you are earning is taxed then you need to earn more so that when you pay the taxes owned you are left with enough to match the inflation rate.

If the rate of inflation was 5% and your tax rate was 40% then you need to earn closer to 8.34% to match the inflation rate.

If you earn less than the inflation rate you are slowly losing money each year.

Answer 5

If you live in America that is not a correct average. Inflation varies
however, if you want to base the inflation on an average one year
of high or low inflation won't effect the overall average.

Answer 6

No.

Some years you will have to make more.

In the 40s and 70s inflation was almost 15% in some years.

You cannot really expect an inflation of 5% in the 10s, 20s, 30s, 40s, 50s and 60s. (I mean from 2010-2060)

ETFs, REITs, Mutual Funds, Options and Stocks will easly beat inflation.

Six things can be done to reduce inflation to 1% or less:
1) More Solar, Wind and Water Power (As opposed to Coal)
2) More Mexican and Canadian Biodiesel, Mexican and Canadian Diesel and Mexican and Canadian Ethanol (As opposed to Oil from Nigeria, Iraq, Angola, Algeria, Kuwait, Chad, Azerbaijan)
3) Minimum Wage in Mexico increased from $0.50 USD to $1.00 USD
4) Minimum Wage in British Columbia, Saskatchewan, Manitoba, Ontario, Quebeq, New Brunswick increased to $8.50 CAD.
5) Minimum wage in Washington, Idaho, Montana, North Dakota, Minessota decreased to $4.15 USD.
6) Minimum wage in New Mexico and Arizona decreased to $3.15 USD.

Any of these measures are HIGHLY UNPOPULAR and anyone proposing these laws would commit political suicide.

Therefore, be ready for HIGH INFLATION IN THE FUTURE.

Answer 7

yes, 4-5% is usually true, but it also depends on where you live.

Real estate if you can get into it.