Stock market crashing or booming isn’t as scary as they make it

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The Real Risk in Investing Isn’t Volatility, It’s Losing Purchasing Power

When people talk about “risk” in investing, they almost always mean volatility. The ups and downs of the stock market. The sudden crash in property prices. The sleepless nights caused by seeing your investments fall in value on a chart.

But this view of risk is incomplete — and often misleading. The real risk, the one that quietly eats away at wealth over decades, is losing purchasing power to inflation.

Why Inflation Is the Silent Threat

Inflation doesn’t make headlines like market crashes do, but it’s just as destructive. If the inflation rate averages 5% per year, the value of your money halves in about 14 years. That means P1,000 today will only buy you about P500 worth of goods and services in the future.

The frightening part? You don’t see this erosion day by day. It creeps in quietly, while your bank balance looks unchanged. On paper, you still have the same amount of money. In reality, what that money can buy is shrinking.

This is why keeping all your wealth in cash feels safe, but is one of the riskiest decisions you can make. You’re guaranteeing that your future self will be poorer, even if you never “lose” a single pula.

Volatility vs. Permanence

Market volatility, on the other hand, is noisy but temporary. Stocks crash and then recover. Property values fall but eventually climb back. Businesses go through cycles of expansion and contraction.

Volatility can make investors nervous in the short term, but history shows it usually fades with time. Inflation, however, doesn’t reverse itself. Once your money loses value, it never comes back.

This is the critical distinction most people overlook:

• Volatility is uncomfortable but temporary.

• Inflation is silent but permanent.

What This Means for Investors

If you’re serious about protecting and growing wealth, your primary goal shouldn’t be avoiding volatility — it should be owning assets that outpace inflation.

• Stocks: Over the long run, companies grow revenues and profits, which typically rise faster than inflation.

• Real Estate: Land and property values, especially in growing economies, tend to keep up with or exceed inflation.

• Businesses: Ownership in a productive enterprise is one of the most reliable hedges against inflation.

• Commodities: In certain cycles, they act as protection against rising prices.

This doesn’t mean you should ignore volatility. It still matters, especially if you need liquidity in the short term. But when you zoom out, the greatest danger isn’t a 30% dip in the stock market — it’s the slow, guaranteed erosion of your future spending power if you sit on the sidelines.

The Overlooked Lesson

Most investors are afraid of the wrong thing. They spend energy trying to dodge volatility when they should be building resilience against inflation. True risk management isn’t about keeping your money “safe” in cash — it’s about making sure your future self can buy more, not less, with the wealth you’ve built.

In investing, what looks risky is often safer over time, and what looks safe is often riskier. The sooner you understand this, the sooner you can make decisions that actually preserve and grow wealth.