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. How does a bull market in stocks affect the bond market?

    Take a deeper look at the relationship between the bond market and equities, and see what might happen to bonds during the ...
  4. How does inflation affect fixed-income investments?

    Learn about the ways inflation can harm fixed-income investments. Find out how to monitor the impact of inflation using common ...
RELATED TERMS
  1. Inflationary Risk

    The uncertainty over the future real value (after inflation) ...
  2. Bond

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

    The owner of a government or corporate bond. Being a bondholder ...
  4. AAA

    The highest possible rating assigned to the bonds of an issuer ...
  5. Inflation-Linked Savings Bonds (I Bonds)

    U.S. government-issued debt securities similar to regular savings ...
  6. Discount Bond

    A bond that is issued for less than its par (or face) value, ...
Hot Definitions
  1. Derivative

    A security with a price that is dependent upon or derived from one or more underlying assets.
  2. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  3. Sharpe Ratio

    The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such ...
  4. Death Taxes

    Taxes imposed by the federal and/or state government on someone's estate upon their death. These taxes are levied on the ...
  5. Retained Earnings

    Retained earnings is the percentage of net earnings not paid out as dividends, but retained by the company to be reinvested ...
  6. Demand Elasticity

    In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. ...
Trading Center