INVESTING

A constant risk I see new investors take is their unwitting belief that wealth should be measured in nominal currency, such as United States dollars or British pounds sterling, instead of purchasing power.  In the end, purchasing power is the only thing that matters.  It is the only thing that counts - how much stuff you can buy or give away to help others.

In To Guard Against Inflation, Focus on Purchasing Power Not Dollars, we look at some of the specifics of why this is so important.  By taking a net-of-inflation approach to your portfolio, you can opportunistically look at the returns from investing in bonds or other asset classes and realize that what looks like a good return might actually be a money-losing proposition!

Worried About Inflation? Think About Purchasing Power. originally appeared on About.com Investing for Beginners on Tuesday, January 31st, 2012 at 06:06:37.

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Those of you who are new to investing need to know that your journey to wealth is not going to happen as one gradual, gently sloping incline.  It's not comparable to getting an education, where you enroll in kindergarten and follow your way through the various grade levels until you are handed a piece of paper and a congratulations.  You can toil away for years, spending less than you generate in income, investing the surplus in stocks, bonds, real estate, mutual funds, private businesses, or whichever other asset classes interest you, and suddenly find a big payoff or, alternatively, wake up one day and realize just how much money you've amassed.

The first type of experience happens most often when someone builds a business and sells it.  This is called a liquidity event