{"id":8808,"date":"2022-04-14T06:59:14","date_gmt":"2022-04-14T06:59:14","guid":{"rendered":"https:\/\/www.foxymonkey.com\/?p=8808"},"modified":"2022-04-14T07:06:27","modified_gmt":"2022-04-14T07:06:27","slug":"inflation-rates","status":"publish","type":"post","link":"https:\/\/www.foxymonkey.com\/inflation-rates\/","title":{"rendered":"How High Inflation Affects our Investments"},"content":{"rendered":"\n<p>We are almost 2 months into the Ukraine invasion. Yet stocks are higher than they were on the 24th of Feb when the war started.<\/p>\n\n\n\n<p>Predicting any short term movements is very hard. This is why I try to focus on history and data.<\/p>\n\n\n\n<p>We live in a period of <strong>high inflation and rising interest rates<\/strong>. Everything becomes more expensive, and let&#8217;s not talk about energy and household bills.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>How do different assets perform in such periods? <\/li><li>What are the risks we face? <\/li><li>What can consumers\/investors do to build and protect their wealth?<\/li><\/ul>\n\n\n\n<p>Once a year, I read the Global Investment Returns Yearbook by Credit Suisse.<\/p>\n\n\n\n<p>Although the full version is quite long (300 pages or so), they publish a summary edition which is just 50 pages. You can <a href=\"https:\/\/www.credit-suisse.com\/media\/assets\/corporate\/docs\/about-us\/research\/publications\/credit-suisse-global-investment-returns-yearbook-2022-summary-edition.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">read it here<\/a>.<\/p>\n\n\n\n<p>It focuses on history rather than trying to predict the future.<\/p>\n\n\n\n<p><strong>Another reason I like it is that it analyses data from all countries, not just the US<\/strong>.<\/p>\n\n\n\n<p>Most research out there focuses on US returns. But during the 20th century, the US enjoyed being that growing superpower, taking a bigger share of the pie, expanding GDP and becoming the world&#8217;s reserve currency.<\/p>\n\n\n\n<p>Just look at this graph. Can you spot the outlier?<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/stockmarket-1899-2022.png\"><img fetchpriority=\"high\" decoding=\"async\" width=\"966\" height=\"442\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/stockmarket-1899-2022.png\" alt=\"world stock market size over time\" class=\"wp-image-8809 lazyload\" data-srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/stockmarket-1899-2022.png 966w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/stockmarket-1899-2022-300x137.png 300w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/stockmarket-1899-2022-768x351.png 768w\" sizes=\"(max-width: 966px) 100vw, 966px\" \/><noscript><img fetchpriority=\"high\" decoding=\"async\" width=\"966\" height=\"442\" src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/stockmarket-1899-2022.png\" alt=\"world stock market size over time\" class=\"wp-image-8809 lazyload\" srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/stockmarket-1899-2022.png 966w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/stockmarket-1899-2022-300x137.png 300w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/stockmarket-1899-2022-768x351.png 768w\" sizes=\"(max-width: 966px) 100vw, 966px\" \/><\/noscript><\/a><\/figure>\n\n\n\n<p>Drawing conclusions from the US returns is just <em>survivorship bias<\/em>.<\/p>\n\n\n\n<p>US investors enjoyed 2.1% higher returns per year than the world markets. This might not sound like a lot, but it&#8217;s enough to make a US investor 10 times wealthier than their ex-USA counterparts if invested since 1900.<\/p>\n\n\n\n<p>Credit Suisse now analyse <strong>90 countries with over 120 years of data<\/strong> on stocks, bonds, inflation, rates etc.<\/p>\n\n\n\n<p>So here is a summary of the 2022 edition!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Asset returns across countries<\/h2>\n\n\n\n<p>The United States has enjoyed an amazing 20th century. It became the strongest economic and military power. The dollar is the global reserve currency.<\/p>\n\n\n\n<p>As expected, their markets have done very well.<\/p>\n\n\n\n<p><strong>Between 1900-2021, US stock returns came at 6.7% per year after inflation. Bonds returned 2% real.<\/strong><\/p>\n\n\n\n<p>We shouldn&#8217;t really forecast returns based on US alone. That&#8217;s just too optimistic!<\/p>\n\n\n\n<p><strong>The world excluding USA returned 4.5% per year after inflation for stocks, and 1.7% for bonds.<\/strong><\/p>\n\n\n\n<p>The UK has lagged behind in the past 20 years. 3.8% real return for stocks, same for bonds. Since 1900, numbers look much better, 5.4% for stocks, and 1.8% real return for bonds.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Current environment: High Inflation<\/h3>\n\n\n\n<p>Throughout the 2010s we investors are spoiled by low interest rates, low inflation and money printing. Governments followed their &#8220;Quantitative easing&#8221; programme. Also, markets started from cheap valuations due to the 2007-2009 crisis.<\/p>\n\n\n\n<p>The environment has changed now. People eat out and travel, demand is back. But supply chains were disrupted due to Covid,&nbsp;and commodity prices have gone through the roof partly due to Putin&#8217;s war.<\/p>\n\n\n\n<p>As a result, UK inflation is much higher (7% CPI, <a href=\"https:\/\/www.ons.gov.uk\/economy\/inflationandpriceindices\/bulletins\/consumerpriceinflation\/march2022\" target=\"_blank\" rel=\"noreferrer noopener\">April 2022<\/a>).<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/payrise.jpg\"><img decoding=\"async\" width=\"460\" height=\"618\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/payrise.jpg\" alt=\"salary rise inflation meme\" class=\"wp-image-8810 lazyload\" data-srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/payrise.jpg 460w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/payrise-223x300.jpg 223w\" sizes=\"(max-width: 460px) 100vw, 460px\" \/><noscript><img decoding=\"async\" width=\"460\" height=\"618\" src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/payrise.jpg\" alt=\"salary rise inflation meme\" class=\"wp-image-8810 lazyload\" srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/payrise.jpg 460w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/payrise-223x300.jpg 223w\" sizes=\"(max-width: 460px) 100vw, 460px\" \/><\/noscript><\/a><\/figure>\n\n\n\n<p>And here is the inflation over time from ONS.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/uk-inflation-2012-2022.png\"><img decoding=\"async\" width=\"868\" height=\"583\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/uk-inflation-2012-2022.png\" alt=\"UK CPI inflation last 10 years\" class=\"wp-image-8811 lazyload\" data-srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/uk-inflation-2012-2022.png 868w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/uk-inflation-2012-2022-300x201.png 300w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/uk-inflation-2012-2022-768x516.png 768w\" sizes=\"(max-width: 868px) 100vw, 868px\" \/><noscript><img decoding=\"async\" width=\"868\" height=\"583\" src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/uk-inflation-2012-2022.png\" alt=\"UK CPI inflation last 10 years\" class=\"wp-image-8811 lazyload\" srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/uk-inflation-2012-2022.png 868w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/uk-inflation-2012-2022-300x201.png 300w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/uk-inflation-2012-2022-768x516.png 768w\" sizes=\"(max-width: 868px) 100vw, 868px\" \/><\/noscript><\/a><figcaption>UK inflation 2012-2022. Source: ONS<\/figcaption><\/figure>\n\n\n\n<p>The story is similar in other places, like the US. Inflation is back and running wild. 8.5% as I&#8217;m typing this in April 2022.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>How have stocks and bonds performed historically during high inflation?<\/strong><\/h2>\n\n\n\n<p>Let&#8217;s start with bonds:<\/p>\n\n\n\n<p><strong>As an asset class, bonds suffer in periods of high inflation. They provide a hedge against deflation.<\/strong><\/p>\n\n\n\n<p>This makes sense because bonds have fixed returns without taking into account a rising (or falling) cost of living.<\/p>\n\n\n\n<p>For example, if you lend me \u00a3100.00 and I promise to pay you \u00a3110.00 next year, you will not be better off if inflation is 10%. In real terms, your money next year can buy exactly what it could today.<\/p>\n\n\n\n<p>If on the other hand, inflation is -5% (basically, deflation) you will be better off by 15% which is great.<\/p>\n\n\n\n<p><strong>Bonds shine in deflation<\/strong>! During such an environment, bonds returned 19.2% per year after adjusting for deflation. This included data from 21 countries and a 122-year history.<\/p>\n\n\n\n<p><strong>During high inflation, bonds are destroyed<\/strong>. -24.7% in inflation of 18%. Cash won&#8217;t protect you either.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Stock and Bond returns versus Inflation<\/h3>\n\n\n\n<p>Here is a picture showing the after-inflation return of stocks and bonds. I explain how to read this graph below the picture.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/real-returns-stocks-bonds-inflation.png\"><img loading=\"lazy\" decoding=\"async\" width=\"1182\" height=\"546\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/real-returns-stocks-bonds-inflation.png\" alt=\"real bond and equity returns versus inflation rates, 1900-2021\" class=\"wp-image-8813 lazyload\" data-srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/real-returns-stocks-bonds-inflation.png 1182w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/real-returns-stocks-bonds-inflation-300x139.png 300w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/real-returns-stocks-bonds-inflation-1024x473.png 1024w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/real-returns-stocks-bonds-inflation-768x355.png 768w\" sizes=\"(max-width: 1182px) 100vw, 1182px\" \/><noscript><img loading=\"lazy\" decoding=\"async\" width=\"1182\" height=\"546\" src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/real-returns-stocks-bonds-inflation.png\" alt=\"real bond and equity returns versus inflation rates, 1900-2021\" class=\"wp-image-8813 lazyload\" srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/real-returns-stocks-bonds-inflation.png 1182w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/real-returns-stocks-bonds-inflation-300x139.png 300w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/real-returns-stocks-bonds-inflation-1024x473.png 1024w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/real-returns-stocks-bonds-inflation-768x355.png 768w\" sizes=\"(max-width: 1182px) 100vw, 1182px\" \/><\/noscript><\/a><\/figure>\n\n\n\n<p>Here is how you can read this graph: Inflation is the line ranging from -30% to +18% on the right.<br><br>Inflation starts from very low, -30% in the &#8220;Low 5%&#8221; bucket where bonds returned 19.2% and stocks 12.9% per year. The next bucket is &#8220;Next 15%&#8221; where inflation reads at -3.5%. Bonds at -3.5% inflation returned 9.1% with stocks returning 11.7%.<\/p>\n\n\n\n<p>The last bucket is 18% inflation. We don&#8217;t live in an 18% inflation environment. But if we did, shares (-10%) would perform better than bonds (-24.7%). Worth noting that in an 18% inflation world, the -10% real return from shares is actually a positive 8% nominal return <strong>before <\/strong>inflation.<\/p>\n\n\n\n<p>So your money is at least growing, but not fast enough to catch up to 18% inflation, hence the negative real return.<\/p>\n\n\n\n<p>That&#8217;s all according to history. Of course, no one knows how the next high inflation will play out for stocks!<\/p>\n\n\n\n<p><strong>Looking at the data, we can also see that the sweet spot for equities is when inflation is low, up to 4%.<\/strong><\/p>\n\n\n\n<p>As Credit Suisse suggests, contrary to the common belief, equities are inflation-beaters,<strong> <\/strong>not inflation hedges!<\/p>\n\n\n\n<p>During the period of high inflation, they might not catch up. But thanks to the inflation-beating returns in other periods, equities are one of the best ways to beat inflation.<\/p>\n\n\n\n<p>Here in the UK, Covid changed everything. In 2020 we had basically zero inflation, but now (April 2022) inflation is &gt;6%!<\/p>\n\n\n\n<p>So to avoid a negative&nbsp;real return, our UK assets need to return at least 6%!<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What about Property?<\/h3>\n\n\n\n<p>It&#8217;s a shame Credit Suisse don&#8217;t mention property at all. <\/p>\n\n\n\n<p>In the last post, we also saw how property \/ <a href=\"https:\/\/www.foxymonkey.com\/uk-reits\/\" target=\"_blank\" rel=\"noreferrer noopener\">REITs <\/a>offered good inflation protection during the 1970s.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How do assets perform when interest rates go up?<\/h2>\n\n\n\n<p>Governments target inflation of around 2%. Not too high to cause panic and rioting, not too low to risk deflation.<\/p>\n\n\n\n<p>To keep inflation in this 2% sweet spot, when inflation goes higher they fight it. They do what they can by raising interest rates. These days they also stopped printing money (quantitative easing).<\/p>\n\n\n\n<p>You might wonder, why do higher rates cause a drop in inflation though?<\/p>\n\n\n\n<p>Interest rates are the &#8220;price of money&#8221;.<\/p>\n\n\n\n<p>So <strong>higher interest rates mean more expensive loans, higher mortgage payments and higher credit card debt<\/strong>. Consumers, businesses and investors slow down.<\/p>\n\n\n\n<p>The economy slows down as a whole too.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/buffet.jpg\"><img loading=\"lazy\" decoding=\"async\" width=\"850\" height=\"400\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/buffet.jpg\" alt=\"buffet on interest rates\" class=\"wp-image-8815 lazyload\" data-srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/buffet.jpg 850w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/buffet-300x141.jpg 300w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/buffet-768x361.jpg 768w\" sizes=\"(max-width: 850px) 100vw, 850px\" \/><noscript><img loading=\"lazy\" decoding=\"async\" width=\"850\" height=\"400\" src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/buffet.jpg\" alt=\"buffet on interest rates\" class=\"wp-image-8815 lazyload\" srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/buffet.jpg 850w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/buffet-300x141.jpg 300w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/buffet-768x361.jpg 768w\" sizes=\"(max-width: 850px) 100vw, 850px\" \/><\/noscript><\/a><\/figure>\n\n\n\n<p>Here is how assets perform during an interest rate rising and falling environment<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/returns-correlate-rates.png\"><img loading=\"lazy\" decoding=\"async\" width=\"484\" height=\"437\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/returns-correlate-rates.png\" alt=\"Asset returns after rate rises and falls\" class=\"wp-image-8816 lazyload\" data-srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/returns-correlate-rates.png 484w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/returns-correlate-rates-300x271.png 300w\" sizes=\"(max-width: 484px) 100vw, 484px\" \/><noscript><img loading=\"lazy\" decoding=\"async\" width=\"484\" height=\"437\" src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/returns-correlate-rates.png\" alt=\"Asset returns after rate rises and falls\" class=\"wp-image-8816 lazyload\" srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/returns-correlate-rates.png 484w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/returns-correlate-rates-300x271.png 300w\" sizes=\"(max-width: 484px) 100vw, 484px\" \/><\/noscript><\/a><\/figure>\n\n\n\n<p>In periods of rising rates, equities returned just 3.0% after inflation, compared with 9.7% during rate falls.<\/p>\n\n\n\n<p>US bonds gave an annualized real return of just 0.2% in the same environment, compared with 3.7% while rates fell.<\/p>\n\n\n\n<p>So as we can see there&#8217;s a big difference in returns between periods of &#8220;rate-hiking&#8221; like the one we experience now.<\/p>\n\n\n\n<p><strong>Stock and bond returns have been lower during periods of rising interest rates<\/strong>. But these happen to be periods of higher inflation too. And as we saw already, higher inflation (4+%) is also bad for assets.<\/p>\n\n\n\n<p>To sum up, we don&#8217;t know if lower returns come from high inflation or from the higher rates that follow in order to fight it. But one thing is clear:<\/p>\n\n\n\n<p><strong>In hiking cycles like the one we live through now, returns from equities and bonds are lower.<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Diversification, once again<\/h2>\n\n\n\n<p>Here is a nice quote I hadn&#8217;t heard before:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>Diversification should be the default, so perhaps we should instead think of a failure to diversify as a self-imposed tax.<\/p><cite>Credit Suisse yearbook, 2022<\/cite><\/blockquote>\n\n\n\n<p>Diversification is the reason I am invested in global passive index funds like VWRL. It&#8217;s easy to get carried away by amazing stock returns. They exist. It&#8217;s just that it is very hard to find them and keep them.<\/p>\n\n\n\n<p>The idea behind index funds is that they capture the entire haystack. So you won&#8217;t have to look for the needle, it&#8217;s already there. <\/p>\n\n\n\n<p>If you don&#8217;t have the skill to invest in individual stocks or fund managers, then investing in a low-cost index fund remains the best way to succeed.<\/p>\n\n\n\n<p>Credit Suisse say that the current environment of higher volatility and sector\/factor rotation is potentially more promising for active investors. But they also highlight that generating alpha requires genuine skill and higher risk exposure.<\/p>\n\n\n\n<p>They also reminded me of the paper from Bessembinder (2018). It showed that the majority of US stocks (57.4%) have had lifetime buy-and-hold returns below 3-month US bonds. <\/p>\n\n\n\n<p><strong>Since 1926, the best-performing 4% of companies explain the net gain for the entire US stock market<\/strong>!<\/p>\n\n\n\n<p>Stock markets can make you richer. But even considering the amazing decade of the 2010s, they won&#8217;t make you rich quickly.<\/p>\n\n\n\n<p>You always hear about diversification in the stock market.<\/p>\n\n\n\n<p>But diversification is how you stay rich. Concentration is how you get rich.<\/p>\n\n\n\n<p>Owning private businesses is a form of concentration. Those of you who run businesses know that you&#8217;re taking a more concentrated risk. But in return, you get a potentially much higher reward which gives you autonomy and money to spend and invest.<\/p>\n\n\n\n<p>Stocks and real estate will grow and multiply your wealth as you build it.<\/p>\n\n\n\n<p>In the <a href=\"https:\/\/www.foxymonkey.com\/moonshots\/\" target=\"_blank\" rel=\"noreferrer noopener\">Moonshots article<\/a> I wrote:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p>You look at businessmen, like Felix Dennis of&nbsp;<a href=\"https:\/\/www.foxymonkey.com\/how-to-get-rich\/\" target=\"_blank\" rel=\"noreferrer noopener\">How to get rich book<\/a>&nbsp;and they have one thing in common: They put most (if not all) of their assets into very few bets. They put all their eggs in there and then some!<br><br>Sometimes more than they have, either in a form of a loan or using other people&#8217;s money.<br><br>Note just their working capital, but their <strong>human capital<\/strong> too (i.e. their working hours). <br><br>Concentration pays if you are sitting on a big winner. Diversification pays if you are wrong.<\/p><\/blockquote>\n\n\n\n<p>For my Greek friends out there, it&#8217;s really expensive to be wrong!!!<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/msci-greece.png\"><img loading=\"lazy\" decoding=\"async\" width=\"967\" height=\"487\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/msci-greece.png\" alt=\"MSCI Greece vs world\" class=\"wp-image-8817 lazyload\" data-srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/msci-greece.png 967w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/msci-greece-300x151.png 300w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/msci-greece-768x387.png 768w\" sizes=\"(max-width: 967px) 100vw, 967px\" \/><noscript><img loading=\"lazy\" decoding=\"async\" width=\"967\" height=\"487\" src=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/msci-greece.png\" alt=\"MSCI Greece vs world\" class=\"wp-image-8817 lazyload\" srcset=\"https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/msci-greece.png 967w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/msci-greece-300x151.png 300w, https:\/\/www.foxymonkey.com\/wp-content\/uploads\/2022\/04\/msci-greece-768x387.png 768w\" sizes=\"(max-width: 967px) 100vw, 967px\" \/><\/noscript><\/a><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<p>Stay humble, stay hungry!<\/p>\n\n\n\n<p><em>Are you a business owner with surplus cash in your LTD company? Learn how to put the business cash to work.<\/em><\/p>\n\n\n\n<p><em>Get \u00a3200 off if you register before the SUPER Early Bird offer expires! <em>The <a href=\"https:\/\/www.companyinvestingacademy.co.uk\/\" target=\"_blank\" rel=\"noreferrer noopener\">Company Investing Course<\/a><\/em> live sessions start on the 23rd of May<\/em>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>We are almost 2 months into the Ukraine invasion. Yet stocks are higher than they were on the 24th of Feb when the war started. &#8230; <a title=\"How High Inflation Affects our Investments\" class=\"read-more\" href=\"https:\/\/www.foxymonkey.com\/inflation-rates\/\" aria-label=\"More on How High Inflation Affects our Investments\">Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":8813,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[],"class_list":["post-8808","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How High Inflation Affects our Investments - Foxy Monkey<\/title>\n<meta name=\"description\" content=\"How do assets perform during periods of high inflation and rising interest rates? This is the period we live in now. 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