The consumer price index which is a governmental measurement of changes in the prices of goods and services has been on a steady decline since 1967 due to the impact of inflation.
The consumer price index or purchasing power, is a very important factor when looking at the value of your investment portfolio. If you compared two investors, both with $1,000,000 in liquid assets, but one lived in 1968 and the other in 2020, their stories would be quite different. The 1968 investor had purchasing power of $0.96 which means his million dollars could purchase around $960,000 worth of goods and services. The 2020 investor however, only has purchasing power of $0.13 which means his million dollars can only purchase around $113,000 of the same comparable goods and services.
