Series 7: 10.2.5 Purchasing Power Risk

10.2.5  Purchasing Power Risk

Purchasing power risk is the risk that the return on an investment will not keep up with the rise in the cost of goods and services. Purchasing power risk is also known as inflation risk. When inflation is rising faster than the return an investor is earning, one could argue that the investor is not really earning any “real” return at all but is actually losing value.

Fixed-income investments tend