The National Directory of Certified Public Accountants

Ask A CPA - Investments & Financial Planning

What Is Inflation Risk ?

Risk in the most basic sense is the chance of financial loss. Inflation erodes your purchasing power. Inflation risk is the chance that your savings lose purchasing power due to the steady increase in the cost of goods and services over time. Inflation is is a major threat for investors with a long time horizon. These investors may want a large portion of their investment portfolios invested in securities that historically have outpaced inflation by a decent margin. Generally these investments are in common stock or common stock mutual funds.

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