There is an asset class that beats inflation by miles and this every decade since nearly 100 years. And it is not gold!
Gold has kept up with inflation over the long term, but nothing more than that. 1 ounce of gold buys you the same amount of goods and services today as it did 100 years ago. But small cap stocks have consistently beaten inflation big times in every decade. The smallest margin was 4.7% in the 1980s. On average, small caps returned 13% annually, while inflation averaged 3.2%. The result: Small caps increased an investor’s buying power by 10% per year!
Many investors think small caps are they are very risky. But while some are garbage or underperform by a margin, small caps as an asset class have a great long term track record and for many conservative investors, surprisingly, increase the buying power even during periods of high inflation. Therefore, small caps are important in a well diversified and balanced portfolio.
Sven Franssen