PortInflation: What Is It?
An increase in the general price level, which reduces the purchasing power of money.
Explanation
Most often measured by the Consumer Price Index. For investors, it's a natural benchmark: a return lower than inflation means a real loss, despite a positive number in the account.
Inflation affects the market through interest rates. Higher inflation typically leads to higher rates, which reduce the valuation of future earnings—most significantly for companies whose profits are still ahead of them.
Example
The portfolio earned 4% with inflation at 6%. It lost approximately 2% of its purchasing power in real terms.
Related Terms
See Live Inflation Data
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Portevo is not an investment advisor. The data and analyses are for informational and educational purposes only and do not constitute a recommendation or an offer to buy or sell financial instruments. Quotes are from external providers and may be delayed. You make investment decisions at your own risk.
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