Assessment of the effectiveness of long-term investment strategies of individuals taking into account inflationary risks and changes in monetary policy

Abstract

In the context of macroeconomic instability and intensifying inflationary processes accompanied by transformations in the monetary policy of central banks, the formation of long-term personal capital by individuals acquires particular complexity, since traditional savings instruments demonstrate insufficient capacity to preserve the purchasing power of accumulations over 15-25-year horizons. Analysis of the dynamics of real returns on the main asset classes available to retail investors on the Russian financial market in the period 2014-2024, including bank deposits, the Moscow Exchange total return index, government bonds, gold in ruble terms, and real estate, reveals significant cyclicality of results driven by fluctuations in the key rate and cumulative inflation, the average value of which was 7.42 percent with a standard deviation of the real rate of 3.27 percentage points. Quantitative modeling of three typical portfolio strategies – conservative, balanced, and aggressive – with annual rebalancing demonstrates that nominal fixed-income instruments provide minimal real returns (0.52-0.75 percent per annum), while variable-return assets such as equities and gold generate substantially higher real growth (7.20 and 8.86 percent respectively), albeit associated with elevated volatility and maximum drawdowns of up to 43.12 percent. The study of rolling five-year windows emphasizes the critical role of market entry timing, especially for risky portfolios where the spread of cumulative real returns exceeds 53 percentage points, as well as the comparative effectiveness of lump-sum investing and regular contribution averaging, the latter of which reduces the impact of unfavorable timing during periods of market stress. Sharpe ratios, maximum drawdowns, and the share of years with negative real returns illustrate the fundamental trade off between short-term resilience and long-term capital formation, while the inclusion of inflation-hedging assets correlated with national currency depreciation and global price shocks enables the doubling of real capital value every 9–12 years in balanced and aggressive configurations. The obtained quantitative estimates reveal the nonlinear impact of monetary policy tightening and easing cycles on value redistribution across asset classes, underscoring the necessity of diversified approaches that account for behavioral biases and inflation illusion to ensure the sustainability of personal savings in a volatile macroeconomic environment. These results help establish the article’s relevance for private investors and financial planning specialists by providing a basis for assessing the applicability of the described approaches to specific investment horizons and risk profiles without reference to the full text when detailed calculations are not required.