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Inflation.
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| Submitted: Mon Jun 19 2006
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INFLATiON WHAT IS INFLATION? Inflation is a general rise in prices across the economy. This is distinct from a rise in the price of a particular good or service. Individual prices rise and fall all the time in a market economy, reflecting consumer choices and preferences, and changing costs. Inflation measures the extent to which your money today will buy less in the future. Inflation is perhaps the most significant indicator for securities markets because it determines the erosion of the real value of your investment, and the necessary rate of return to compensate yourself for this erosion. For example, if inflation is measured at 1% per year, then you will need to earn an extra 1% per year in your investments to compensate for the effective 1% "loss" that your portfolio will realize as a result of the increase in prices during the year. inflation is a general rise in prices...
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