It's what we are all looking for in this economy - an investment that beats inflation. Duann Cronje, a financial planner at Fiscal Private Client Services shares his thinking. 

Personal inflation rate explained

 When we mention the word inflation, it is very important to note that every individual investor will have a different personal inflation rate. Where we spend our money on a daily, weekly, monthly, and yearly basis will differ, and therefore everyone has different line items in their budget increasing with different rates on an annual basis that affect their personal inflation rate. 

To put this simply, if you look at medical costs, these increase at rates much higher than inflation - meaning that an individual who has more medical costs than the average person, due to chronic illness or ill health, should have a higher personal inflation rate than investors who don’t have medical costs. 

Think time and money

Another important factor when considering which investments beat inflation, is the time horizon of your investments. If you want to beat inflation over a 10-year period, chances are that cash investments won’t get you this result. You will likely lose purchasing power over time. 

Asset classes take on different levels of risk, and therefore need different periods to perform sufficiently to beat inflation or reach their investment targets, essentially rewarding the investor for taking on risk. 

Importantly, an investor's own risk profile and life stage should be considered along with the investment time horizon when selecting their investments. Generally, the following guidelines can be used to beat inflation over certain periods:

1 year – a combination of mainly Cash and Bonds

3 years – a combination of mainly Bonds and Property

5 years – a combination of mainly Property and Equity

10 years + – mainly Equity 

If you would like to find out more, please see www.fiscal.co.za or https://www.linkedin.com/company/fiscal-private-client-services/