Inflation and investment

Dear Mr. Tan,

Inflation is expected to increase to 5% in 2008. Interest rate remains very low, less than 2%. The stockmarket is volatile. How should we invest our money to be protected against inflation?

REPLY

The high rate of inflation is caused by temporary factors, i.e. the large increase in oil price and the increase in GST. I hope that it will return to a low level from next year.

If you are investing for the long term, it is better to invest in an investment fund with at least 50% in equities. It is likely to give a return that is higher than inflation in the future. (My estimate is 6% over the long term.)

The global stockmarket has corrected from its high level. While it may remain volatile in the short term, the current level represents fair value, as it is a discount of 20% from the recent peak.

Read this FAQ:
http://www.tankinlian.com/faq/savings.html