Stock Returns After Inflation
Inflation is a subtle, gradual force which can erode your investment returns. When the effect of inflation is considered, the net return of many investments can be disappointing. The key to successful investing -- both for income- and growth-oriented investors -- is staying ahead of inflation. How do you stay ahead? Historically, a diversified portfolio of stocks has provided investors an effective means to beat inflation. The table below shows historical returns over the past 25 years for various investment classes before and after inflation as of 09/30/2007.
Investment Class |
Average Annual Return |
Average Annual Return Adjusted for Inflation |
|---|---|---|
| S&P 500 Stock Composite | 13.64% | 11.34% |
| Long-term Government Bonds | 10.16% | 7.86% |
| Treasury Bills | 4.84% | 2.54% |
Source: Thomson Financial
When reviewing this data, you must consider the important differences between investment categories. Of course, the common stocks in which Principal growth-oriented funds invest have a greater risk of loss of principal and price fluctuation than U.S. Government securities, such as Treasury bonds and bills which are backed by the full faith and credit of the U.S.Government. The market value of Treasury bonds and bills will fluctuate inversely with interest rates prior to maturity, and will equal par value at maturity. The S&P 500 Composite is an unmanaged index and is not available for investment. The market value of stocks and bonds will fluctuate with market conditions. And there is no guarantee that any investment will continue to perform as well as it has in the past.
Before investing in mutual funds, investors should carefully consider the investment objectives, risks, charges and expenses of the funds. This and other information is contained in the free prospectus, which can be obtained by:
- Calling 1.800.222.5852 and requesting a prospectus (all share classes)
- Downloading a prospectus (A, B & C shares)
- Downloading a prospectus (J shares)
- Requesting a prospectus be mailed to you (A, B & C shares)
- Requesting a prospectus be mailed to you (J shares)
Please read the prospectus carefully before investing. See the mutual fund section of our site for a description of the different share classes.
