Imagine that you have been saving your hard-earned dollars for years, slowly building your portfolio. You have invested in stocks, bonds, and real estate. You feel confident in your financial future since you have built a diversified investment portfolio. However, you hear news that the government has decided to print more money to fund its budget deficits.

As the new dollars enter the system, the value of existing dollars begins to decrease drastically. The prices of goods and services start to increase, which affects those who have saved their money or live paycheck to paycheck the most. Suddenly, what you can buy with the same amount of money is less than before. The riches are getting richer because their wealth is mostly comprised of assets, which automatically go up in value when inflation occurs.

Inflation acts as a tax on the poor that benefits the rich. The poor tend to have most of their wealth tied up in cash and debt, which loses value over time due to inflation. In contrast, the rich tend to hold a large portion of assets that appreciate in value as inflation takes effect, such as real estate, precious metals, and stocks and bonds.

To guard against the impact of inflation, it is essential to have a diversified investment portfolio where the assets make up a significant proportion.

In conclusion, inflation is a silent and insidious tax on the poor, but if you build a diversified portfolio with assets that appreciate with inflation, you can protect yourself from its effects. So, think about your money and investment choices carefully, and allocate your portfolio wisely to endure the test of inflation.