Hello friends, In Today’s article we discuss chapter 2 of intelligent Investor. In chapter 2 of intelligent investors we The Investor and Inflation.
The Investor And Inflation:-The Intelligent Investor: Chapter 2
In this chapter Benjamin gram discuss What is the inflation and how inflation effects the investor and it’s an investment, as well as Intelligent investor how to beat inflation and get a good return from the investment for that purpose Benjamin gram gives some advice for Intelligent Investor, They are as follows:
Money Illusion:-The Intelligent Investor: Chapter 2
Money illusion is the type of money trap in which we lose the value of money and can’t get it back. Let’s understand the concept.
Money has some value, but the value of money is decreased by inflation. let’s take one example of Geeta. Geeta has money of 1 million in his bank account for one year.
In that year inflation rate rises up to 7% and you know bank returns between 4 to 5 %. So she gets a return of 4% but the inflation is 7% so they lose the money of 3% of all money,
This loss is called the money trap and also called the money illusion.
read more about money illusion: Click here
Gold as an Inflation hedge:-The Intelligent Investor: Chapter 2
Gold is metal and so it’s likely metal. So in our society gold has its own value.
It fully depends on the demand and supply so its supply is very poor. so demand is more for that reason it’s going to be raising its price.
So for that Gold, sometimes hedge the inflation, But most important is that not anytime hedge the inflation by gold. So putting money in the gold is sometimes is good decision for the security of money but it’s not called an investment. (The Intelligent Investor: Chapter 2)
You can put money in the gold but you have to check to do diversification and found out the minimum charges that the company gives to you for that.
Real Estate as an Inflation hedge:
Real Estate can be the best for the inflation hedge because when inflation rises you can raise the rent of real estate.
But you have to buy the right property, right time, and right place, by considering this you can put money in real estate to hedge inflation. But you have gained knowledge of real estate and do that investment for an inflation hedge.
Real Estate Investment Trust:
This is the type of company that invests in real estate so you can buy its company share. But it’s as risky as other companies but it has good management which has a good knowledge of real estate investment. You can invest in the company to hedge inflation.
This above is some advice given by Benjamin gram( warren buffet’s mentor). so if you follow this advice you will be going to hedge the inflation. (The Intelligent Investor: Chapter 2)
the book summary of one up on wall street book: Click here