How Can an Investment Portfolio Protect Purchasing Power Over Time?

Measure the portfolio against what the family expects it to pay for, including goods and services. A balance can look stable in nominal terms while buying less over time. Families also need to consider where they spend, travel, or hold assets, since currency movements can change what their capital is worth across borders.

Define the Needs the Portfolio Must Meet

Start with expected spending and taxes. Account for other commitments, too. Separate cash reserved for near-term obligations from capital intended to support long-term goals. That distinction helps the family avoid treating every dollar as if it has the same purpose or time horizon. It also makes it easier to decide how much volatility is acceptable in each pool.

Cash can provide stability and flexibility, but its purchasing power can erode when prices rise or a currency weakens. In The Family Office Book, I discuss why preservation comes before yield for family cash, while still accounting for inflation and the purchasing power of other currencies. Review the cash policy periodically so it remains aligned with spending and commitments. The capital call and liquidity planner can help organize near-term needs.

Use Assets With Different Sources of Value

Consider how each asset is expected to contribute: through income, appreciation, utility, or a combination. Real estate, for example, may provide rental income as well as tangible value. Its liquidity and financing costs matter, as do operating costs. Other hard assets may have practical uses or market demand that differ from financial assets. No category guarantees protection, and a portfolio can still lose value.

Look at how holdings may respond to inflation, currency changes, and market stress. Diversification is useful when assets have different sources of risk, but labels alone do not establish that they will behave differently. Review the underlying exposures and the role each holding plays. The guide to accounting for inflation and the portfolio models guide can support that discussion.

Track Purchasing Power Over Time

Use a consistent reporting approach that shows portfolio value, income, and spending. Include fees and taxes, along with inflation assumptions. For families with assets or obligations in several currencies, track exposures in the currencies that matter to them. This gives the family a clearer view of whether nominal growth is keeping pace with its actual needs.

Revisit assumptions when spending plans, family obligations, or the portfolio change. A cash policy that once fit may no longer match a family's commitments. If tax or legal structures affect how assets can be used or transferred, talk with your CPA or attorney. The guide to planning liquidity across investment horizons can help connect long-term purchasing power with the timing of cash needs.

Preservation comes first, yield comes second but when thinking about that also take into account the purchasing power of the US dollar and while today inflation is not a big threat, down the road it will be a threat and then along those lines, as far as internationally, what's the purchasing power of the dollar.

Sources: The Family Office Book, The Single Family Office. Informational only, not financial, legal or tax advice.