To understand wealth building in America today, you must understand inflation, for it is the force that drives the economic engine. Back in the day of Solomon, the medium of exchange was measured in quantities of goods with intrinsic value like precious metals, livestock, fabric, and, yes, even slaves. Inflation was a non-entity.
Today’s investor can ignore inflation at his own risk. It’s there and it will chew your profits to pieces unless you’re proactive in mitigating the damage. The federal government blatantly manipulates the inflation number by including or excluding certain factors as needed to make sure the final result doesn’t scare anyone too badly â€“ usually the fed number is about 4% annually.
Solomon Success is pretty darn sure from our business and personal experiences that the true inflation number is closer to 10%, and maybe more. This is quite important to you as an investor. It means that, in real terms of purchase power, you have to make at least a 10% return on your investment just to break even. The stock market doesn’t average that year after year. Neither does a certificate of deposit, or savings or checking account.
It begins to become clearer why stocks, bonds, and mutual funds are a losing game. The return on investment isn’t high enough to keep up with the devaluing of the dollar. And why does the dollar keep devaluing? It begin in the early 1970 when President Nixon took us off the gold standard. It accelerates every time the government goes on a wild printing spree, pumping out more greenbacks to keep up with the bailout circus. To continue wealth building in this topsy-turvy economic climate, you’ve got to think against conventional wisdom. Real estate!
The Solomon Success Team
Flickr / Mike Licht.NotionsCapital.com