Put simply, inflation affects all aspects of the economy, from consumer spending, business investment and employment rates to government
programmes, tax policies and interest rates. Understanding inflation is crucial to investing because inflation can reduce the value of investment returns.
CONCERNED ABOUT THE EFFECTS OF INFLATION ON YOUR INVESTMENTS?
Inflation can eat away not only at your capital growth, but also the value of dividend payments, which will not usually keep pace with rising inflation. With a weaker pound following the Brexit vote pushing up import costs and contributing to rising prices, this is potentially bad news for investors.