QUESTION: How not to lose the purchasing power of savings over a 1–2 year horizon?

Preserving the purchasing power of accumulated funds over a medium-term horizon of one to two years is an important task for every investor or simply a frugal person. The main enemy of any savings is inflation, which gradually depreciates money sitting idle on regular bank cards or kept as cash at home.

To protect your capital from depreciation, you need to make your money work with a yield comparable to the level of real inflation in the economy. Conservative financial instruments with a fixed yield are great for this, such as classic bank deposits for a term ranging from a few months to two years, or government federal loan bonds.

When choosing instruments, it is important to consider the planning horizon and not expose your savings to unnecessary risks in the stock market if you will need this money in just a year or two. The optimal solution will be a portfolio of reliable bank deposits and short-term bonds that are guaranteed to return the full amount with interest by the required date.

Completely abandoning the practice of keeping large sums on regular cards without interest on the balance also plays a critical role in capital protection. By transferring free funds to profitable instruments, you will not only protect them from inflation, but also receive additional passive income that can be reinvested for even greater efficiency.