Stock market (pixabay, pexels, freepik)
Billionaire Ray Dalio, director and founder of the world’s largest hedge fund in Rijwater, warns the public not to hold cash during such a period. “We are in a time when prices are going up so do not sit on cash, it is too risky” he tells the US media.
Dalio means that the cash component of the investment portfolio is eroded if it is not invested and yields some return when this process in a period of inflation rises even more risky and it erodes the money.
In principle, in days of inflation, the prices of financial assets rise to catch up with price increases. For example, when inflation rises, companies’ shares are expected to rise, for example, financial shares and shares of retail companies are expected to rise because banks that have index-linked loans will receive more money on the same loan and retailers will raise prices (usually more than inflation) to compensate for rising raw material prices.
Dalio says that whoever holds a high cash component in a portfolio misses the protection afforded by channels like financial stocks, retail and index-linked bonds so in real terms, the investment portfolio loses money on its uninvested cash balances.
It should be noted that in a macroeconomic process, if people want to protect themselves from inflation and buy properties, then they are actually the ones who create inflation, for example, if we buy an apartment to protect against inflation, the neighbor buys an apartment and the friends buy an apartment even though they do not have to, Apartment – the prices will simply go up so that if he wants to buy an apartment, the cash he has will no longer be enough.
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