Knowledge key to inflation immunity

Purchasing power in China is gradually being worn away by severe rates of inflation. In the late 1970s, as the country embarked on reform and opening-up, anyone with more than 10,000 yuan ($1,653) would have been considered affluent. Now, even people living in poverty might have such an amount socked away. But as prices go up and people become thriftier, inflation is also eating away at their savings.

People who try to preserve their wealth through investment should be wary of blindly following prevailing tides and skeptical about big promises from persons in authority. Those who throw their cash in with speculators will only suffer huge losses once the bubble bursts. For investors, there is no substitute for knowledge and rational planning.

Just as many people neglect their diets, investors can easily become complacent and make unhealthy decisions with their money. But as inflation makes the cost of medicine more expensive - both literally and figuratively - healthy investment moves are the best way for staving off losses.

The author is Li Jun, an economic commentator.