Inflation: What is it, and what does it mean for beginning investors?

When the buying power of money erodes...

Put simply, inflation is when the buying power of money erodes over time--we need more dollars to buy the things we need and want. Because of inflation, the prices of food, gas, cars, houses and most everything goes up in price, sometimes rapidly -- bummer!

Economist Milton Freidman said, “Inflation is always and everywhere a monetary phenomenon.” This means when the government injects too much money into the economy, prices tend to rise and inflation occurs.

Since the financial crisis of 2008 through today, the government has been injecting billions of dollars into the financial system to stimulate the economy. When Covid-19 lockdowns halted the economy, all that cash lay mostly dormant.

Now, however, the economy is moving ahead. All those dollars are chasing a slowed supply chain...and viola...inflation is occurring. The dramatic increase in the money supply (40% more than before the pandemic!), supply chain issues, the war in Ukraine have pushed inflation to a 40 year high! OMG!

In fact, the CPI index (consumer price index) rose an eye popping 8.5% year over year as of March, 2022.

So what can investors do to cope with inflation, or -- even better -- actually profit from it?

While inflation tends to erode the value of cash, it can enhance the value of assets. Real estate, gold, and collectables like art and jewelry increase in value in an inflationary environment.

The kind of premier, commercial real estate RealyInvest offers can do very well in such an environment. With RealyInvest you can buy share interests in land and buildings leased to brands you know and use everyday, like Chick-fil-A, FedEx and Starbucks. Pretty cool, right?

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