If you had invested £1000 in the UK Stock Market at the end of 1972, it would have been worth a heart stopping £410 by the end of 1974. Thankfully, by the close of 1975, you would have been back to your £1,000 again. Job done? Not quite, inflation would have reduced its real value to such an extent that it would have taken fully eleven years to get back to square one in real terms. And, before you run for the security of cash, those holding cash at the dawn of 1973 did not see its real value recover for twenty-three years. In both cases, I have assumed all income has been reinvested so for those dependent on their investments for their income, the picture was even worse. So, what’s the message for today’s investors? Well, firstly and rather obviously, you don’t want Seventies style inflation, it’s a killer. Secondly, don’t be lulled into a false sense of security by nominal values, inflation, even at low levels is a corrosive force, steadily eating away at your wealth. With longevity increasing all the time, exposing your income to inflation, for example, by buying a level annuity, could well be asking for trouble. Secondly, in the same way as a small increase in inflation can spell trouble, increasing your return expectations can make a real difference. It may pay to add some riskier investments, such as shares, to your portfolio as a hedge against inflation.