Fear of Inflation Can Cause Investors to Overlook the Potential for Growth in the Positive Years

May 21, 2022 | Investor Behavior

1980 was the last time inflation was 10%. See how investment choices made back then turned out today.

The last time inflation reached 10% was in 1980. Back then, investors were anxious about inflation, the economy, and market volatility. This graph illustrates five choices an equity investor could’ve made at that time. While the seemingly “safer” investment choices of bonds, cash, or gold may have reduced anxiety at the time, they fell behind equity and balanced investors over the long-term.

Number of positive years:

Number of negative years:

Percentage of positive years:

74%

Percentage of negative years:

26%

Number of years when gains were greater than 20%:

Number of years when losses were greater than 20%:

Average Annual Return: 10.60%

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S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.

Bloomberg US Aggregate Bond Index is comprised of government securities, mortgage-backed securities, asset-backed securities, and corporate securities to simulate the universe of bonds in the market.

IA SBBI US 30 Day TBill The index measures the performance of a single issue of outstanding Treasury Bill which matures closest to, but not beyond, one month from the rebalancing date. The issue is purchased at the beginning of the month and held for a full month; at the end of the month that issue is sold and rolled into a newly selected issue. The index is calculated by Morningstar and the raw data is from WSJ.

S&P GSCI Gold Index is a sub-index of the S&P GSCI, provides investors with a reliable and publicly available benchmark tracking the COMEX gold future.

Investing involves risk, including the possible loss of principal. Fixed-income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall. Investments in the commodities market may increase the Fund’s liquidity risk, volatility and risk of loss if adverse developments occur.

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