Question

As the inflation rate rises, the amount of money that has to be spend on any...

As the inflation rate rises, the amount of money that has to be spend on any item increases. The amount of savings decreases as the inflation rises. A company or household will be able to spend less as the inflation rate is high. Therefore, the investment in physical assets like home, buildings and equipment is done. This is because a physical asset will stay for a longer period of time. The movements in the price of physical assets is somewhat unrelated to the price movements in stock market and bond market. The physical assets generally act a hedge against inflation.  

A Physical asset definitely stays for a longer period of time vs nonphysical assets. In my opinion, this is why people are more apprehensive when it comes to working with the stock market. What do you think?

Homework Answers

Answer #1

True investments is subjected may type of risk example Market risk, Interest rate risk, Default risk, Inflation rate risk, other types of risk in case investment in the physical assets such risk are minimum some time no risk involved.

The people prefer to invest such physical assets because the value remains the same or over a period valued appreciate in case Land and Gold, Whereas in intangibles assets value may decrease due to numbers of the factors and transaction in the stock market is complex.

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