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Fred learns how renting works (lemmy.world)

submitted 4 months ago by [email protected] to c/[email protected]

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[–] [email protected] 8 points 4 months ago (2 children)

Thanks! I’ll edit my post with this knowledge in mind.

[–] [email protected] 7 points 4 months ago* (last edited 4 months ago)

Kudos to you for not doubling down!

[–] [email protected] -1 points 4 months ago (1 children)

You were not mistaken though. Read my comment about net debtors benefitting from inflation.

Your general idea of inflation being bad for those who hold money is correct. Stocks and real estate don't counteract inflation, they are just less affected by it.

Wealthy people are net lenders because they usually hold more bonds than they borrow. That means they are negatively affected by inflation.

[–] [email protected] 6 points 4 months ago (1 children)

This isn't true. Wealthy people do not hold more bonds than they issue. Berkshire Hathaway for example has less than 1% of their funds invested in bonds

The mantra is that bonds are part of diverse portfolio but this for people who are investing in retirement funds.

Bonds are often held for this purpose. They are a useful for an income steam but they are not where the majority of anyone's investments are held because they are not fast growers. Furthermore, bonds are a hedge against inflation because they grow faster when inflation is high which obliterates your entire argument.

[–] [email protected] 0 points 4 months ago (1 children)

bonds are a hedge against inflation

This is incorrect and harmful to people who read it. See below:

Inflation is a bond's worst enemy. Inflation erodes the purchasing power of a bond's future cash flows. Typically, bonds are fixed-rate investments. If inflation is increasing (or rising prices), the return on a bond is reduced in real terms, meaning adjusted for inflation.

https://www.investopedia.com/articles/bonds/09/bond-market-interest-rates.asp

[–] [email protected] 3 points 4 months ago

Still not true. I Bonds.

Do not trust anyone who uses investopedia as a primary source on what or how to invest. It's magazine level content. The equivalency here is using popular science as a reference for how to engineer a bridge.