Holders of cash and its equivalents (CDs, T-bills, and the like) may not earn much in the way of interest, but they are at least certain to get all of their principal back. For this reason, many people assume that holding all cash is the safest and most conservative possible investment stance.
But there is a hidden threat to cash holders: while they are assured of getting all their money back, the money they get may be worth less than it was when they first deposited it. This is what's known as "purchasing power risk."
We believe purchasing power risk to be a serious issue for today's cautious investors.
