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What is inflation and how does it affect investments?

The webpage from Aviva explains inflation as the rate at which the general level of prices for goods and services rises, leading to a decrease in the purchasing power of money. It discusses how inflation is measured, typically through indices like the Consumer Price Index (CPI) or the Retail Price Index (RPI) in the UK. The article outlines the causes of inflation, including demand-pull inflation where demand exceeds supply, cost-push inflation due to increased costs of production, and built-in inflation from wage increases. It also touches on the effects of inflation, such as eroding savings, influencing interest rates, and affecting investment returns. The piece advises on how to mitigate the impact of inflation through investments, suggesting that assets like stocks, property, and commodities might offer protection against inflation as they can potentially increase in value over time. Lastly, it emphasizes the importance of understanding inflation for making informed financial decisions, particularly in planning for retirement or long-term savings.

Read the Full Aviva Article at:
[ https://www.aviva.co.uk/investments/investing-for-beginners/what-is-inflation/ ]