To understand the best way to protect money from inflation, we must take a look at historical data. Investing in global equities has historically been an effective strategy to protect and grow wealth beyond the erosive effects of inflation. To illustrate this, let’s compare the performance of a €100,000 investment in the MSCI World Index from 2010 to 2024 against global inflation rates during the same period.

 

 

MSCI World Index Performance (2010-2024):

The MSCI World Index represents large and mid-cap equities across 23 developed markets. Over the 14-year period from 2010 to 2024, the index has demonstrated significant growth. According to data from Curvo, the MSCI World Index (in EUR) achieved a compound annual growth rate (CAGR) of approximately 10.51% during this timeframe.

curvo.eu

Applying this CAGR, a €100,000 investment at the beginning of 2010 would have grown to approximately €420,000 by the end of 2024.

 

 

Global Inflation Rates (2010-2024):

Global inflation rates have varied annually over this period. Based on data from the International Monetary Fund (IMF), the global inflation rates were as follows:

  • 2010: 3.6%
  • 2011: 4.93%
  • 2012: 3.95%
  • 2013: 3.87%
  • 2014: 3.19%
  • 2015: 2.8%
  • 2016: 2.8%
  • 2017: 3.2%
  • 2018: 3.6%
  • 2019: 3.5%
  • 2020: 3.2%
  • 2021: 4.7%
  • 2022: 7.97%
  • 2023: 5.69%

These figures indicate that while inflation rates have fluctuated, they have generally remained below the average annual returns of the MSCI World Index.

statista.com

 

Conclusion:

The comparison underscores the potential of global equities to outpace inflation over the long term. An initial investment of €100,000 in the MSCI World Index at the start of 2010 would have grown substantially by the end of 2024, significantly exceeding the cumulative impact of global inflation during the same period. This historical performance highlights the importance of long-term investment horizons and diversification in protecting and enhancing purchasing power against inflationary pressures.

Please note that past performance is not indicative of future results. Investing in equities involves risks, including the potential loss of principal. It’s advisable to consult with a financial advisor to develop an investment strategy tailored to your individual circumstances.

 

If you would like to discuss your investment queries, make sure to get in touch with the team. We will be happy to help.

You can read our previous articles discussing inflation including; ‘Is Inflation Eroding My Savings?‘ and ‘How Does Inflation Erode The Value Of Money?‘.

By Cian Callaghan, Director Private Clients

Disclaimer


Metis Ireland Financial Planning Ltd t/a Metis Ireland is regulated by the Central Bank of Ireland.


All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified financial adviser before entering any financial contract. Metis Ireland Financial Planning Ltd t/a Metis Ireland will not be held responsible for any actions taken as a result of reading these blog posts.