Inflation Trade

AAA

DEFINITION of 'Inflation Trade'

A method of investing that seeks to profit from an overall increase in price levels. The inflation trade often involves trades in commodities, such as gold and oil, because their prices rise when inflation occurs. Everyone needs to protect themselves against inflation, but the term "inflation trade" refers to a speculative practice of attempting to profit when inflation occurs rather than just hedging against it.

INVESTOPEDIA EXPLAINS 'Inflation Trade'

Inflation is caused by the Federal Reserve's printing of money, and it is a detrimental force that erodes the value of money over time. It means that people cannot buy as much with their money tomorrow as they can today. Inflation also reduces the impact of investment earnings and makes it risky to hold too much of one's nest egg in cash. Because of inflation, people must expend time and effort just to preserve the value of the wealth they have accumulated, let alone to increase its value. To increase wealth, people must select investments with returns that can outpace inflation, such as stocks.

RELATED TERMS
  1. Inflation

    The rate at which the general level of prices for goods and services ...
  2. Treasury Inflation Protected Securities ...

    A treasury security that is indexed to inflation in order to ...
  3. Reflation

    A fiscal or monetary policy, designed to expand a country's output ...
  4. Deflation

    A general decline in prices, often caused by a reduction in the ...
  5. Stagflation

    A condition of slow economic growth and relatively high unemployment ...
  6. Headline Inflation

    The raw inflation figure as reported through the Consumer Price ...
Related Articles
  1. Entrepreneurship

    Cost-Push Inflation Versus Demand-Pull ...

  2. Options & Futures

    The Consumer Price Index: A Friend To ...

  3. Economics

    What You Should Know About Inflation

  4. Options & Futures

    Introduction To Inflation-Protected ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center