Inflation and Long-Term Investment

http://indahkeluargaku.blogspot.com/2012/04/inflation-and-long-term-investment.html

One of the basic components of the most impact in the long-term investment would be inflation. Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services.

For example the price of 1 kg of rice is $ 2, if inflation is 10%, then the next year the price of 1 kg of rice will be $ 2.02 and will be $ 3.22 for 5 years to come, or $ 2 now will be worth $ 1.82 next year, and will be worth $ 1.24 five years to come. if our regular monthly spending $ 100, then next year will be $ 110 and will be $ 161,051 for the next 5 years, or in other words $ 100 now, will be equal in value to $ 62.09 five years to come.

On previous chapter, we ever discus about investing 65 cents each day, invested in a 5% annual interest compounded monthly, it would be $3073 for 10 years and to $16470 in 30 years. Actually, the amount of $3073 and $16470 isn’t corrected by inflation factor. Suppose the inflation is 2% each year, then $3073 in a 10 years to come, will be equal in value to $ 1886.55 now and $16470 in a 30 years to come, will be equal to $ 3810 now.

Realize that the inflation factor would be the biggest threat in the long-term investment, it won't be surprising if nowadays government is trying to suppress inflation nicety, so it doesn’t harm the long-term investment. For those who want to invest their funds in long-term investments, must consider the amount of investment interest, which must have higher value than the inflation rate.