Inflation Risk
Inflation risk is the risk that the purchasing power of an investment’s returns will be reduced by inflation. Inflation is a general increase in prices and fall in the purchasing value of money. Inflation risk is the risk that the value of an investment will not keep up with the rate of inflation. This means that the investor will not be able to purchase the same amount of goods and services with the returns from the investment as they could have before inflation.
History of Inflation Risk
Inflation risk has been a concern for investors since the early days of investing. Inflation has been a major factor in the success or failure of investments since the beginning of the stock market. Inflation can have a significant impact on the returns of an investment, and investors must be aware of the potential risks associated with inflation. Inflation risk is especially important for long-term investments, as the effects of inflation can be more pronounced over time.
Table of Comparisons
| Year | Inflation Rate |
|---|---|
| 2020 | 1.3% |
| 2019 | 2.3% |
| 2018 | 2.4% |
| 2017 | 2.1% |
| 2016 | 1.3% |
Summary
Inflation risk is the risk that the purchasing power of an investment’s returns will be reduced by inflation. Inflation is a general increase in prices and fall in the purchasing value of money. Inflation risk is the risk that the value of an investment will not keep up with the rate of inflation. This means that the investor will not be able to purchase the same amount of goods and services with the returns from the investment as they could have before inflation. More information about inflation risk can be found on websites such as Investopedia, The Balance, and the U.S. Securities and Exchange Commission.
See Also
- Interest Rate Risk
- Market Risk
- Credit Risk
- Liquidity Risk
- Currency Risk
- Political Risk
- Systemic Risk
- Volatility Risk
- Operational Risk
- Regulatory Risk
