Inflation, however, represents a different kind of risk. Inflation means that every year, the same amount of money buys less. Inflation isn't much of a problem for money you're going to be using soon. You won't lose much buying power over a year or so, and it's probably more important to preserve what you've got. But the longer inflation has a chance to nibble away at your money, the more inflation risk you run.
Most investments generally involve more of one type and less of the other.
To reduce one type of risk, you have to take more of the other. Short-term investments, for example, involve very little investment risk because they are designed to preserve your initial investment. But because the returns they pay have historically been lower than those of other investments, over the long term they can involve more risk from inflation. By comparison, stocks and stock mutual funds involve more investment risk. Their prices can go up and down a lot, especially in the short term.