Inflation doesn’t feel dramatic, there’s no sudden crash or headline moment. Your bank balance doesn’t visibly drop. But slowly and consistently, the purchasing power of your money erodes. Prices rise, lifestyles become more expensive, and what used to feel like a comfortable amount of money gradually buys less and less.

Unlike market risk, inflation isn’t really optional. Markets might go up or down, Investments might perform better or worse than expected, but if your money isn’t growing faster than inflation, then in real terms you are losing ground.

“That’s why I often say inflation is the only flavour of risk that absolutely guarantees a loss in real terms.”

Cash absolutely has a role. Everyone should have liquidity. Life happens, emergencies arise, opportunities appear unexpectedly. As a general guide, somewhere around three to six months (depending on circumstances) worth of expenditure held in cash provides resilience and flexibility without compromising long-term progress. But beyond that excessive cash becomes a drag and it’s definitely not King.

If your money sits in low-return accounts for years while the cost of living rises, you are effectively locking in declining purchasing power. It doesn’t feel like a loss because the numbers don’t fall. But in real terms, the value is slowly shrinking.

That doesn’t mean everything should be invested either. Time horizon/Investment Term matters. Money that’s earmarked for a specific life event within the next five years, buying a property, relocating, funding education, or anything with a fixed timeline, usually shouldn’t be fully exposed to high levels of volatility.

But long-term money is different. If capital is intended for retirement, future lifestyle, or financial independence decades down the line, then leaving it sitting in cash or low-return assets can quietly do more damage than market volatility ever could.

Let me give you a simple example

Two people each start with £300,000.

One leaves their money sitting in cash. The balance doesn’t fluctuate. It feels safe and predictable. Twenty years later, they still have £300,000 on paper.

The second person receives proper financial planning and an education around market risk. Off the back of this conversation they are advised to invest in a globally diversified equity fund and achieves an annualised return of 9% per year, broadly in line with long-term global equity market returns.

After 20 years:

And that’s before you even considering inflation.

If inflation averaged 3% per year over that same period, the purchasing power of the original £300,000 would fall to roughly £166,000 in today’s money. So while one person believes they preserved wealth, in real terms they’ve lost almost half their buying power.

This is the cost of certainty.