How Inflation Erodes Investment Gains Over 50 Years 📉

Key Takeaways

• Inflation can drastically reduce the purchasing power of your money over time.
• A $1,000 investment in large-cap U.S. stocks held from 1974-2024 would be worth $341K before inflation and just $56K after adjusting for inflation.
• The gap between the value before and after adjusting for inflation grows wider over time. This is due to compounding. Each year, the amount you lose to inflation gets added to the previous year's loss, resulting in a bigger and bigger difference between your unadjusted returns and what your money can actually buy.