Inflation
Inflation is the general rise in prices over time, which reduces what your money can buy.
Why this matters
Your portfolio must grow faster than inflation to increase real purchasing power.
Simple example
If prices rise 3% in a year, $100 buys less than it did last year.
Common mistakes
- Looking only at account balance growth and ignoring purchasing power.
- Keeping long-term money only in low-yield cash.
- Assuming inflation is always low and stable.