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TIPS for Safer Investing

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Inflation - a persistent increase in the price level- threatens people's financial well-being by reducing the purchasing power of money, cutting into the future value of savings, and, when unexpected, lowering the real rate of return on investments. To protect their holdings, people take great pains to find investments whose returns exceed the inflation rate, such as stocks, bonds, and numerous other financial instruments. But when their returns are corrected for inflation, investors often see negative numbers.

Inflation - a persistent increase in the price level- threatens people's financial well-being by reducing the purchasing power of money, cutting into the future value of savings, and, when unexpected, lowering the real rate of return on investments. To protect their holdings, people take great pains to find investments whose returns exceed the inflation rate, such as stocks, bonds, and numerous other financial instruments. But when their returns are corrected for inflation, investors often see negative numbers.


Suggested citation: Sargent, Kevin H., and Richard D. Taylor, 1997. "TIPS for Safer Investing," Federal Reserve Bank of Cleveland, Economic Commentary, 07.01.1997.

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