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Client Conversations: Are You Losing the Race Against Inflation?

December 2017

There can be a downside to playing it "safe" if your assets are in investments that don't keep pace with inflation.

Client Conversations gives financial advisors an easy way to communicate with clients on topics influencing financial markets; it highlights common investor behaviors and offers ways to address the challenges investors face. Share this article with your clients, and remember to follow your firm's policies that govern sharing content with clients and prospects.


 

Fear of market volatility can make seemingly safe investments appear alluring. The downside of playing it “safe,” however, is that you may actually be losing money by putting your assets in investments that don’t keep pace with inflation. The end result for you could be a loss in purchasing power.

Let's look at an example to bring this to life. Ford sold 1 million Mustangs in 1966—just 18 months after its introduction—when the cost of a '66 standard coupe was $2,522. At that time, $100,000 invested in a 6-month CD would have provided you with $5,462 in income—more than enough to buy two Mustangs! Unfortunately, the income on the same $100,000 CD today would only provide you with enough income to pay for a spare tire kit for your cherished Mustang.

The Effects of Inflation: $100,000 6-Month CD Investment

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Talk to your financial advisor today about investments with the potential to outpace inflation

 

 

CDs are insured by the FDIC, offer a fixed rate of return, and are generally designed for short-term savings needs. The principal value and investment return of investment securities (including mutual funds) are subject to risk, will fluctuate with changes in market conditions, are generally considered long-term investments, and are not suitable for all investors.

 

Client Conversations gives financial advisors an easy way to communicate with clients on topics influencing financial markets; it highlights common investor behaviors and offers ways to address the challenges investors face. Share this article with your clients, and remember to follow your firm's policies that govern sharing content with clients and prospects.


 

1Data Source: 6-Month CD rate for 1966 is from The Federal Reserve; 6-Month CD rates for the remaining years are from the Citi 6-Month CD US Dollar, 2/17
2Data Source: cjponyparts.com, retrieved 12/17
3Data Source: roadandtrack.com, retrieved 12/17
4Data Source: accessories.ford.com, retrieved 12/17

All investments are subject to risk, including the possible loss of principal.

This information should not be considered investment advice or a recommendation to buy/sell any security. In addition, it does not take into account the specific investment objectives, tax and financial condition of any specific person. This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed. This material and/or its contents are current at the time of writing and are subject to change without notice. This material may not be copied, photocopied or duplicated in any form or distributed in whole or in part, for any purpose, without the express written consent of Hartford Funds. 

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