There are several risks investors must consider when building portfolios to achieve financial goals. Inflation is an increasingly important risk for investors, particularly for retirees. In a recent survey1 , we found that inflation was cited as the most significant threat to retirement security, rated more than twice as highly as other risks, including longevity risk, market risk, and healthcare risk.

Asset classes have historically addressed inflation risk differently. For example, certain investments, such as cash, have historically had higher returns when inflation expectations are higher. Alternatively, other investments, such as real assets, particularly commodities, have historically performed better when actual realized inflation exceeds expectations (something known as unexpected inflation).