For months, prices have been rising faster than they have been in a long time. It shouldn't get much better in 2022. And so the Germans cannot avoid paying more attention to the topic of inflation. You can feel this devaluation not only when shopping or refueling, where more has to be paid, but also a little less noticeably on the current account or in the depot. At first glance, the account balances there are not much lower than usual. But even if they stay stable, that's a problem. Because then inflation creeps into your wealth. It loses its “real” value. A year doesn't seem to be that dramatic, but the years add up to a lot. A deposit that was worth 100,000 euros in 2000 is now only worth around 63,000 euros in real terms.if exchange gains or interest have not compensated for this since then.
Dyrk Scherff
Editor in the "Money & More" section of the Frankfurter Allgemeine Sonntagszeitung.
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This is exactly what investors must now pay more attention to.
You should build an inflation-protected portfolio.
This includes investments that generate at least enough income per year to offset inflation.
It is also important, however, that at least part of the investment should be able to be sold quickly and risks should be distributed.
The assets should therefore not be in just one investment.
Not all options meet these criteria.
property
Having your own house or apartment is currently very popular. One person is fulfilling a lifelong dream, the other is looking for a solid investment with low fluctuations in value and protection against inflation. Real estate only meets this requirement at times. People remember that in times of hyperinflation like 1923, paper money quickly became worthless, but real estate increased in value. The purchase prices, which have been rising steadily over the past ten years, also suggest good protection against inflation. In doing so, many forget the time before. After the reunification boom up to 2008, almost 20 years after all, prices fell or at least rose less than inflation. Real estate owners lost money. This year, however, they would have won
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However, individual years should not be decisive for the question of good protection, but rather longer periods of time. Real estate only provides average protection. This is shown by analyzes by Andreas Hackethal and Philip Schnorpfeil from the Goethe University in Frankfurt and Michael Weber from the University in Chicago. In the inflationary times at the beginning and at the end of the 1970s and around reunification, real estate grew by an average of two percent per year. Throughout the period since 1963, house prices have risen just as much as inflation. In real terms, real estate has not increased in value. This of course applies to the average, in some areas of large cities the prices rose more strongly. By contrast, they fell in some medium-sized cities and rural regions. Overall, however, there are investmentswhich historically protect better against inflation and also generate more profit in other phases. In addition, real estate cannot be sold in the short term and for many is the only investment. The assets are then not well diversified in order to avoid risks. If the property is rented out, it still generates regular income.
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shares
Companies benefit from rising prices. If they can enforce this on the market, their profits and with them the share prices rise. But that only works if inflation does not rise too sharply. Because with very high price jumps, customers refuse and sales suffer. In addition, the central banks then intervene by raising interest rates. This makes refinancing more expensive for companies. This also explains why stocks were not always a good protection against inflation in times of high inflation, as the study by Hackethal & Co. shows. A distinction must be made for this. German stocks lost during these phases, especially those in car companies. Because of the strong competition, it was more difficult for them to push through price increases than, for example, utility companies. Their shares therefore also rose in times of inflation.