Q:
Which of the following would endure the most negative impact based on rising inflation:
a) 'AAA' Bonds
b) Blue Chip Stocks
c) Real Estate
d) Gold
A:
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.

RELATED FAQS

  1. What are the risks of investing in a bond?

    The most well-known risk in the bond market is interest rate risk - the risk that bond prices will fall as interest rates ...
  2. Do long-term bonds have a greater interest rate risk than short-term bonds?

    The answer to this question lies in the fixed income nature of bonds and debentures, often referred to together simply as ...
  3. What determines the price of a bond in the open market?

    Learn more about some of the factors that influence the valuation of bonds on the open market, and why bond prices and yields ...
RELATED TERMS
  1. Bondholder

    The owner of a government or corporate bond. Being a bondholder ...
  2. Bond

    A debt investment in which an investor loans money to an entity ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer ...
  4. Bond Yield

    The amount of return an investor will realize on a bond. Several ...
  5. Bond Resolution

    1. A document used with government bonds, especially general ...
  6. American Callable Bond

    A bond that can be redeemed by the issuer at any time prior to ...
Hot Definitions
  1. Pro Forma

    A Latin term meaning "for the sake of form". In the investing world, it describes a method of calculating financial results ...
  2. Trumpcare

    The American Health Care Act, also known as Trumpcare and Ryancare, is the Republican proposal to replace Obamacare.
  3. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  4. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
  5. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
  6. Hard Fork

    A hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions ...
Trading Center