When investing, one risk to consider is that the value of your assets might not keep pace with inflation. Inflation is an increase in the price of goods and services. If inflation is high, you'll lose purchasing power, which is the amount of goods and services that your money will buy.

Inflation impacts your investments in two ways:

• You will need more money to achieve your financial goals.
• Your return-on-investment must be greater than the inflation rate.

Conservative investments can cause you to lose purchasing power, since the return on your investment might not make up for the amount you fve lost in purchasing power. Let's say your money is in a savings account that earns three percent, but the cost of the car you want to buy increases by five percent. In this case, you haven't kept pace with inflation because the amount you need to purchase the car has grown.