Why start investing? Many people associate investing with a number of myths and fears. One of the most common is the fear of losing money due to market downturns. However, this risk can now be effectively managed through the right choice of investment tools and strategies. Less often, people realize another, equally serious threat – the loss of the value of savings due to inflation. And this is a threat that can only be overcome through investing.

Investing is essential for anyone who has savings.

Let’s explain why. The problem is that inflation – a term often mentioned – causes a significant loss of money’s value over time. This loss is not immediately visible. On your account or in your wallet, you still see the same amount, which appears to be intact.

But €4 (100 CZK) tomorrow is not the same as €4 today. The loss of money’s value means that over time, you can buy less with it – your purchasing power decreases. Only by investing can you reverse this unfavourable trend. Every person who saves should aim to be able to afford more in the future with their savings than they can today.

Purchasing power, inflation, or the value of money – for many, these concepts may still seem abstract.

Let’s picture this with a concrete example. Imagine we are exactly ten years ago, at the turn of 2014 and 2015. We have two €4 (100 CZK) banknotes in our pocket. We want to spend one and save the other. In the grocery store, we decide to buy, for example, a classic 250g pack of butter for one €4 banknote. We choose butter for this example, but you can substitute anything else – real estate, a pint of Pilsner beer in your favourite pub, or the cost of various services. In all cases, we would reach a similar conclusion.

At the beginning of 2015, a 250g pack of butter cost between €1.20 and €1.60 (30–40 CZK). Let’s say we could buy three packs for one €4 note. We keep the other €4 and consider two scenarios for how the situation would look today, ten years later:

If we had placed the €4 under a mattress or in a book at the turn of 2014 and 2015 and found it again ten years later to spend on butter, we would discover that today the same butter costs about €2.80 (70 CZK). This means we could buy at most one and a half packs. The €4 note, which looks exactly the same, has lost roughly half its purchasing power over those ten years.

If, instead of hiding it under a pillow, we had invested the €4 ten years ago in one of the commonly available mutual funds investing in U.S. stocks, the situation would look entirely different. Over the past ten years, these funds, despite occasional fluctuations, have grown by about 10–11% annually. The €4 invested at 10% per year would now be worth almost €10.40 (260 CZK). If we sold the investment today and used the proceeds to buy butter at the current price of €2.80 (70 CZK) per pack, we could buy more than three and a half packs – specifically 3.7 packs.

By investing, we would have achieved the desired goal: beating inflation and increasing our purchasing power. A similarly effective result can be achieved even over shorter periods by selecting more conservative investment types. How is this possible?

Investing benefits from compound interest. The magic of compound interest lies in earning interest on the invested amount and then earning interest on the accumulated interest.

This helps our savings grow at an accelerated rate. Thanks to this, investing can overcome inflation.

Do you want to maintain and ideally increase your purchasing power? Without investing, it won’t happen!

With the loss of money’s value due to inflation, the future will likely be even worse. Keeping money under the mattress, or at best in a savings account, is disastrous for its value over time. Savings can only be protected through responsible and meaningful investing. Come and consult with us – we know how, and we will be happy to help. Through regulated and transparent investment tools, we will keep your savings in good shape for the long term, and you will be able to afford more in the future. But it’s necessary to start now. Don’t hesitate to contact us.

Note: Currency conversions from CZK to EUR in this article were calculated at a fixed rate of 1 EUR = 25 CZK for illustrative purposes.