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. Inflation-Protected Security - ...

    A type of fixed-income investment that guarantees a real rate ...
  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. Nominal

    An unadjusted rate, value or change in value. This type of measure ...
Related Articles
  1. Investing

    Retirement Planning: Why Real Rates of Return Matter Most

    Here's how to plot your real rate of return, understand your "personal inflation rate" and safeguard your retirement funds against inflation.
  2. Insights

    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.
  3. Insights

    How Inflation Affects Your Net Worth

    When calculating your net worth, don't forget to take inflation into account.
  4. Insights

    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 ...
  5. Trading

    Coping With Inflation Risk

    Inflation is less dramatic than a crash, but it can be more devastating to your portfolio.
  6. Investing

    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.
  7. Financial Advisor

    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.
  8. Investing

    Timeless Ways To Protect Yourself From Inflation

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

    How To Profit From Inflation

    While rising prices are bad news for consumers, inflation can be quite profitable for investors.
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. 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 >>
  3. 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 >>
  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 >>
Hot Definitions
  1. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends each year relative to its share price.
  2. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  3. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  4. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  5. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  6. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
Trading Center