Inflationary Risk

Loading the player...

What is 'Inflationary Risk'

Inflationary risk is the uncertainty over the future real value (after inflation) of your investment.

BREAKING DOWN 'Inflationary Risk'

This is the risk that inflation will undermine the performance of your investment.

Looking at results without taking into account inflation is the nominal return. The value you should care about is the growth of your purchasing power, referred to as the real return.

RELATED TERMS
  1. Real Rate Of Return

    The annual percentage return realized on an investment, which ...
  2. Real Interest Rate

    An interest rate that has been adjusted to remove the effects ...
  3. Inflationary Psychology

    A state of mind that leads consumers to spend more quickly in ...
  4. Nominal Interest Rate

    The interest rate before taking inflation into account. The equation ...
  5. Nominal Value

    The stated value of an issued security. Nominal value in economics ...
  6. Real Income

    The income of an individual or group after taking into consideration ...
Related Articles
  1. Retirement

    Inflation: Inflation And Investments

    When it comes to inflation, the question on many investors' minds is: "How will it affect my investments?" This is an especially important issue for people living on a fixed income, such as retirees. ...
  2. Forex

    Inflation

    An in-depth look at inflation
  3. Term

    What's a Real Rate of Return?

    A real rate of return is an annual percentage investment return that’s adjusted for inflation, taxes or other factors.
  4. Home & Auto

    Timeless Ways To Protect Yourself From Inflation

    Inflation is a natural part of modern life - but there are some ways to cover your assets.
  5. Investing Basics

    Inflation's Impact On Stock Returns

    When stocks are divided into growth and value categories, the evidence is clear that value stocks perform better in periods of high inflation, and growth stocks perform better during periods ...
  6. Retirement

    Inflation: Conclusion

    After reading this tutorial, you should have some insight into inflation and its effects. For starters, you now know that inflation isn't intrinsically good or bad. Like so many things in life, ...
  7. Fundamental Analysis

    How Inflation Affects Your Cash Savings

    Prices tend to rise over time and this inflation can cut into the value of your savings. Here are some ways you can manage the situation.
  8. Investing

    Corporate Bonds and the Impact of Inflation Risk

    The impact of inflation risk affecting corporate bond returns can be significant. It may even result in a real loss of purchasing power.
  9. Investing Basics

    How To Profit From Inflation

    Inflation - defined as a sustained increase in the price of goods and services - seems to be inevitable. While rising prices are bad news for consumers, as it takes an ever-increasing amount ...
  10. Retirement

    Inflation And Your Retirement

    When you're setting financial goals and saving for retirement, don't forget to factor in inflation. Here's how to fight back and protect your future.
RELATED FAQS
  1. 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 ... Read Answer >>
  2. If markets give information on value through price, how can nominal values be out ...

    Learn more about nominal values, real values and how these two measurements differ. Explore the impact of inflation and deflation ... Read Answer >>
  3. Is the nominal value of a security ever also the real value?

    Learn more about nominal values and real values. Find out how these market values change and if they may ever converge for ... Read Answer >>
  4. What is inflation and how should it affect my investing?

    Inflation, an economic concept, is an economy-wide sustained trend of increasing prices from one year to the next. The rate ... Read Answer >>
  5. What is the difference between real and nominal interest rates?

    Learn what nominal interest rates and real interest rates are, how real interest rate takes into account the inflation rate, ... Read Answer >>
  6. What does it signify if there is a large discrepancy between a nation's real and ...

    Discover the differences between real GDP and nominal GDP and what it means when there is a large discrepancy between the ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center