Real Wealth -vs- Inflation

Real wealth is the difference between the net growth of your assets and the loss of purchasing power from inflation.

If you had $10 in total wealth and you now have $11... but everything costs 10% more, then the $10 needs $1 more to buy you the same goods and services. Your wealth is the same.

You may feel wealthier, but it's an illusion.

This really wonderful chart below plots the growth of the S&P500 stock index in black against the net change after inflation in blue... you can see in the 1970's the market was still going up but wealth was decreasing. Because of low inflation, our real wealth has been increasing if you were invested in the stock market... the catch is that only 50% of US Households have any exposure to the stock market, putting them at risk for loss of real wealth over the years.