Inflation
Definition
The rate at which the general level of prices for goods and services rises over time, reducing the purchasing power of money. Inflation is a critical factor in long-term investing, as investments must earn returns above the inflation rate to generate real wealth.
Example
At 6% annual inflation, something costing Rs 100 today will cost approximately Rs 179 in 10 years. This is why simply keeping money in a savings account earning 3-4% leads to a real loss in purchasing power.
Related Calculators
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