The consumer price index (CPI) is a commonly used benchmark to judge the performance of many portfolios and wealth objectives in
the financial services industry. This is because it is seen as a proxy for the growth path of an investor’s future spending needs. As a
result, many investment portfolios are built with the intention to outperform CPI.
In this article, we explore the composition of the CPI basket and whether this basket represents the investor’s future spending needs.
This in turn has important implications for the building of investment portfolios which could end up taking more or less risk than is
required to reach the investor’s financial goals, impacting the ultimate success of their financial plan.
