Inflation

Inflation — the rate at which prices in general rise, shrinking what each peso buys. It is the silent fourth leak from lesson 0.2 and the reason returns must be read in real terms. PH inflation is volatile enough (1.7% one year, near-5% stretches the next) that a “safe” cash yield can be quietly negative in real terms — a price worth knowingly paying on the emergency fund, and nowhere else.

First used in: 1.1 · The two hurdles: benchmarking math I