Why You Invest — And Why It Matters More Than Ever Right Now

Have you ever stopped to think about why you invest your hard-earned money and put up with stock market volatility? 

Seriously…why do you do it? 

Most people, if pressed, would say something like “to grow my money” or “to be ready for retirement.” Those are fine answers, but they’re not the real answer. 

The real answer can be summed up in one word: Inflation. 

Or more precisely, four words: Protect Your Purchasing Power. 

If you’re preparing for or you’ve recently made your retirement transition, this is one of the most important financial concepts to immerse yourself in. If you don’t fully appreciate inflation’s quiet, relentless impact on your savings, you may make decisions in the next decade that could meaningfully affect your long-term financial flexibility.  

The Enemy That Doesn’t Make Enough Headlines 

Here’s what makes inflation so dangerous: it doesn’t crash dramatically like the stock market. There’s no scary red number on the evening news. It simply works in the background, year after year, doing one thing – making your money buy less. 

Consider this: in 1920, $0.17 bought you a full quart of milk. By 1970, that same $0.17 bought you only two cups. By 2025, it buys you eleven tablespoons. Your Money Today Will Likely Buy Less Tomorrow 

The dollar didn’t disappear. It just quietly, steadily lost its purchasing power over time. 

Now let’s look at a personal example. If your lifestyle costs $10,000 per month today, and inflation rises at just the Federal Reserve’s target rate of 2% per year, that same lifestyle will require $18,114 per month 30 years from now. If inflation runs closer to its long-term historical average of 3% per year, you’ll need $24,273 per month to support the exact same lifestyle. 

Please read those numbers again. 

That’s not a market crash. That’s not a black swan event. That’s just inflation doing what inflation has always done.  It’s the reason why the most important job your retirement portfolio might have is not just to grow, but to outpace rising prices over the long arc of your retirement which is 30 years for the average sixty-year-old couple.   

What You’re Actually Doing When You Invest 

This is where a lot of well-meaning people, the media, and even so-called financial “experts” get confused about what investing actually is. 

When you buy stocks or stock index funds, you’re not simply purchasing a ticker symbol that bounces around on a screen. You become an equity owner in a real business. That company uses your capital to grow, and in return, you receive an ownership share of that growth. 

When you buy bonds, you’re acting as a lender. A company or a government entity needs to raise capital, you loan them the money, and they pay you interest in return. 

Both are simply conduits, vehicles through which your capital goes to work in the real economy. The daily price swings you see are not the story. The underlying businesses and the long-term returns they generate are the story.  

And the story, historically, has been a very good one. 

What 100 Years of Data Tells Us 

From 1926 through 2025, nearly a century that includes the Great Depression, World War II, the 1970s stagflation crisis, the dot-com collapse, the 2008 financial crisis, a global pandemic, and every correction in between, a single dollar invested in the US Large Cap Index grew to $21,453. In the US Small Cap Index, that dollar became $43,837.   

By contrast, that same dollar kept in Treasury Bills grew to just $25. And inflation consumed the equivalent of $18 in purchasing power over that same period. Capital Markets Have Rewarded Long-Term Investors 

Large cap stock returns have averaged more than 7% per year greater than inflation historically. Small cap stocks have returned even more. 

Meanwhile, money market funds, CDs, and bonds have barely kept pace with inflation, doing a poor job of preserving your purchasing power over a 20 or 30-year retirement. 

This is not an argument to ignore risk. It’s an argument to understand what risk actually is. 

Avoiding the inherent volatility that comes with investing in broadly diversified stocks is not the absence of risk. It’s simply a different kind of risk – the quiet, invisible kind that can erode your purchasing power while you wait for a “better time” to invest. 

There is no better time. There is only your time horizon. 

Your Most Influential Decision 

Once you have set aside funds to support several years of your anticipated withdrawals – money not subjected to the short-term market volatility of stocks – a significant factor influencing your long-term financial outcome comes down to one binary question: 

What percentage of your retirement portfolio will you invest in ownership shares of quality companies (stocks) vs. fixed income investments (bonds, money markets, and CDs)? 

Your answer to that question has had, and will likely continue to have, a profound impact on your ability to generate the investment returns you need to support the lifestyle you’ve planned for.   

Historically, the higher the percentage you can position in a long-term, globally diversified mix of equities, the higher the probability of protecting your purchasing power over your lifetime.  

What This Means for You 

If you’re in your 50s and preparing for your retirement transition, it’s not too late to get this right.   

If you’re not 100% confident with your current strategy, consider taking advantage of a free Retirement Strategy Assessment.  We’ll take a clear-eyed look at your current strategy, your anticipated spending needs, and whether your retirement portfolio is positioned to help support your purchasing power for the long haul. 

You’ve spent decades doing the hard work. We believe it’s important to take the necessary steps to help increase your odds of having it align with your long-term financial goals. 

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only. Past performance is no guarantee of future results.