How much risk-taking is required to beat inflation?
Over ten years of financial repression have painfully reminded investors of the difficulty of preserving their wealth. Since then, interest rates have rebounded, but with them came a return of the spectre of inflation, making the outlook for real rates much less rosy. For return-seeking, risk-tolerant investors, the slow erosion of purchase power may be less of an issue, but for wealthy investors, it frequently matters.
We have, therefore, taken a closer look at the long-term trajectory of inflation-adjusted interest rates and asked how much exposure to riskier assets like stocks defensive investors should take to protect their estates.