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2020 Vision

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5. Equities Help Protect Purchasing Power

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There’s a quaint charm when your grandfather recalls how he could see a movie for a dime as a boy. But there’s also an unpleasant reality there called inflation. Those who ignore it by failing to invest in assets with the potential to beat inflation may be facing a very unpleasant surprise. History shows that equities have outpaced inflation by a significant margin over the long term.

Stocks, Bonds, Cash Equivalents and Gold vs. U.S. DollarInflation-Adjusted Returns for the Period from December 31, 1977 to June 30, 2014

Chart is for illustrative purposes only and does not reflect the performance of any Franklin, Templeton or Franklin Mutual Series fund. Source: © 2014 Morningstar. Stocks are represented by S&P 500 Index; Bonds are represented by Ibbotson Associates SBBI Long Term Corporate Index; Cash Equivalents are represented by the P&R 90-Day U.S. Treasury Index; Gold is represented by the S&P GSCI Gold Spot Index; U.S. Dollar is represented by the growth of the nominal dollar beginning in 1978, taking inflation into account. Inflation is calculated using the CPI. Indexes are unmanaged, and one cannot invest directly in an index. Past performance does not guarantee future results.

Investing to Combat Inflation

Inflation, by definition, drives prices up and pushes the purchasing power of your saved money down. While not much attention has been paid to inflation since the early '80s, recent fiscal concerns have many wondering how much inflation will impact our economy in the years ahead. Stocks, despite their recent travails, have done the best job of providing returns after inflation is taken into consideration.

The Bottom Line

  • Over time, inflation shrinks buying power.
  • Speak to a financial advisor for help creating an investment plan with the goal of protecting purchasing power.

Another reason to be an equity investor: History Favors a Return to the Mean

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All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions.

For more information on any of our funds, contact your financial advisor or download a free prospectus. Investors should carefully consider a fund’s investment goals, risks, sales charges and expenses before investing. The prospectus contains this and other information. Please read the prospectus carefully before investing or sending money.

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