While clients are justified in their feelings of anxiety with the soaring inflation rate, it is important for them to be made aware of the track records of certain assets. It is therefore worth emphasising that for long-term investors to maintain their purchasing power through retirement, stocks have historically been a great wealth building asset.
Diversification of portfolios has also historically proved to outpace inflation in most periods. Therefore, investing rather than cashing out or holding onto money during these uncertain periods is one of the best ways to combat the effect of inflation.
By sharing this historical data with clients, they are more likely to feel more at ease with leaving their money in stocks and investments. However, it is important to remember that clients’ needs differ and therefore, this will not be applicable to clients with shorter-term needs.