It's easy to become complacent about the risks of inflation when it's virtually non-existent, but it's important to be prepared for it over the long term. April's news reminds us that inflation must be considered when planning a long-term, strategic retirement investing approach. Your money's value will erode unless your portfolio's returns keep pace with inflation. Better than T-bills, but not by much. That's almost four times better than bonds, and head and shoulders above T-bills.
Real returns take on greater meaning for long-term investors.
The longer you have to invest, the more damage inflation can cause. Higher real returns that can be provided by stocks put more money in your account to counteract inflation. Understandably, some investors shy away from stocks because of their volatility in the short term. The practice of diversifying your portfolio among stocks and fixed income investments can help smooth the fluctuations of each asset class and help outpace inflation over the long term. Real returns may be less of an issue if you've accumulated most of your nest egg and will soon start spending it.