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Understand the inflation and diversification when you’re investing


If you ignore inflation in choosing a long-term investment vehicle, your investment may shrink its purchasing power. According to a report from a Bank in South East Asia, in August 2013, Indonesia experienced inflation of 8.79% and in July 2013 8.61%. That is, if you invest money in a State-Owned Bank Deposit that gives 5.46% interest for 1 year, or even in a non-foreign exchange private bank (renowned for high-interest rate reputation) 7.21% for 1 year, you are actually losing money. This is just one of many examples of how the inflation affects your investment. Meanwhile, you can consider hiring a forex broker if you wish to have an expert support to avoid the mistakes in your investment.

For the majority of people, stock investing or mutual funds is one way to keep up with inflation. You need to keep in mind that stock values can go up and down at any time. That’s because most investment stocks are at risk. However, stocks provide the greatest profit potential and have consistently surpassed inflation since the 1940s.

Diversification is to divide the capital you own into multiple assets. A common example is a diversification in gold, stocks, property, and debt. Why is this step necessary? The goal is to prevent a total failure if one asset loses because there are other assets that have profits. The burden felt when you lose is reduced.

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