Purchasing power

What a given amount of money can actually buy.

Example

$1,000 today buys less than $1,000 could buy twenty years ago, because of inflation.

Preserving purchasing power, not preserving the number on a statement, is the actual goal of investing over long periods.

Inflation — The general rise in prices over time, which reduces how much a given amount of money can buy.
Real return — An investment's return after subtracting inflation - what you actually gained in purchasing power.

The nominal safety that loses money anyway — The balance cannot fall, and that is exactly why the real risk in this class is invisible. Inflation reduces what the money buys, and the tax is levied on the nominal interest rather than on what you actually gained. (13 min)
No earnings, no dividends - just relative rates, inflation and flows — A currency has no cash flow to value. Its price reflects interest rates, inflation, trade and capital flows and sentiment, and forward prices are set mechanically by interest rate differences. (11 min)
Inflation and real returns — A return that beats zero isn't automatically a good one. It has to beat inflation first, or your money is quietly shrinking while the balance grows. (9 min)