It is certain that, at least once in your life, you must have read a message talking about the “increase in inflation”, right? But, do you know what that means? Do you know how inflation directly impacts finances and your life? No? So do not worry!

Well, today, we're going to teach you what inflation is, how it impacts investments and other useful information! Check out!

So, inflation means the increase in price levels, this means that an inflationary process happens when the market value rises, that is, various products consumed by people.

And in the opposite direction, deflation occurs when there is a drop in market values! That is, inflation is nothing more than, the loss of purchasing power, loss of ability to buy the same products for the same values as before.

So, so that we can measure these values, some indicators help us, such as the IPC, INPC, IPA and IGP-M, serving to help with various financial applications!

It is important to mention that inflation is not to be confused with the phenomenon of hyperinflation.

This is because, in hyperinflation, there is also an increase in prices, but in a greater proportion, indicating recession and crises of stability, greatly harming the economy!

Well, the main cause of the increase in inflation is the increase in demand for products, services and others, as well as public expenses that directly affect the collection of taxes.

In addition, the low market competition resulting from the famous “cartels”, giving rise to abusive price increases.

Another problem that affects inflation is indexation, which occurs when prices are indexed to rates and accumulate, as well as increased production costs that are passed on to the final price of goods and services, or even when the market increases the prices even without reasons.

Therefore, in the law of supply and demand, there are several issues that directly impact the increase in the phenomenon of inflation!

So, inflation is a very simple process to understand, because, as we said, it is about the increase in the value of a good or service within a short, medium or long term!

Example: You go to the market to buy 1 kg of meat paying R$15. A week later, you go back to the same market to buy 1 kg of meat, but you pay R$45. This is what stands out as the inflation process in practice!

Therefore, even if it seems like a seven-headed animal, we often live with the process of inflation!

Well, first of all, we need to know the fixed income securities that are linked to inflation values.

In this, among them: Treasury Direct IPCA and Treasury Direct IGP-M, directly remunerating investors according to the rates of price increase.

Therefore, IPCA is the broad national consumer price index, used by the Central Bank, calculated every month by the IBGE, and points to the variation in the life course of families with incomes between 1 and 40 minimum wages.

And yet, there is the IGP-M is the general price index, used in readjustments of rent contracts, being a broad inflation measure weighted by the Broad Producer Price Index (IPA), Consumer Price Index (IPC) and National Construction Cost Index (INCC).

So, one of the effects felt by inflation on investments is the loss of return on assets.

This means that the inflation process takes away the purchasing power of money and, thus, the investment pays with rates higher than the tax rates.

Therefore, it is necessary to monitor inflation rates frequently by opting for investments that pay above inflation, as well as covering investment expenses! In order to be able to invest and receive for the investments made!