Which of the following would endure the
most negative impact based on rising inflation:
a) 'AAA' Bonds
b) Blue Chip Stocks
c) Real Estate
The correct answer is a).
Bonds show a far greater degree of vulnerability during
inflationary times than do the other choices, which,
historically, have fared well when the cost of goods
and services has increased. Bondholders incur rising
interest rates, which drive down the value of their
investments. Furthermore, the interest paid on bonds
also loses purchasing power during times of inflation.