Series 82: Purchasing Power Risk

Purchasing Power Risk

Purchasing power risk is the risk that the return on an investment cannot keep up with the rise in the cost of goods and services. 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. Fixed-income investments tend to have more purchasing power risk than stocks. This is because they tend to yield lower returns on average tha