Equities as an investment
Investing in equities
How the equity market outpaces inflation in the long run — and what compounding can mean for your wealth.
inflation protection
Equities versus inflation
How the equity market outpaces inflation.
The equity market has historically outpaced inflation. Companies often pass on rising costs to their customers, allowing profits to keep pace. Jeremy Siegel (Wharton School) showed that US equities have outperformed inflation by an average of 6.7% per year over a very long period.
Even traditionally safe options — savings deposits or 10-year government bonds — offer no guarantee of a positive real return. According to the CPB, the real 10-year interest rate has been negative on multiple occasions in recent decades.
compounding
Interest on interest
Long-term investing makes the difference.
With compounding, the achieved return is reinvested. Your returns earn returns — and over the long term you get exponential growth.
Investment €100,000 · 6.7% per year · 30 years
With compounding
Without compounding
With compounding
€700K
After 30 years — return on returns.
Without compounding
€301K
After 30 years — returns paid out.
“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it.”