Inflation Eats Away at Cash Value, Stocks Offer Better Long-Term Prospects

Cash may appear to be safe and stable, but it can lose purchasing power over time due to inflation. According to the Consumer Price Index, Canada's inflation rate rose 3% year-over-year in July, while the Bank of Canada aims to keep inflation around 2%. If inflation averaged 3% for the next 30 years, $10,000 would have a purchasing power equivalent to only about $4,120 today.

On the other hand, compounding can work in favor of an investment. For example, if the same $10,000 earned an average 7% annual return, it would grow to roughly $19,672 after 10 years and approximately $76,123 after 30 years.

While cash has a job in covering near-term bills, investors should consider owning businesses capable of growing alongside the economy. One such opportunity is Canadian Pacific Kansas City (TSX:CP), which operates a railway connecting Canada, the United States, and Mexico.