What Happens
As prices rise, the amount of goods and services that can be bought with the same amount of money decreases, so the real value of cash and deposits gradually erodes. The degree of price increases can be checked through economic indicators such as the Consumer Price Index (CPI).
Relationship to Asset Management
During periods of inflation, holding assets only in cash and deposits is sometimes said to reduce real purchasing power, and this is sometimes cited as one reason to consider diversifying into other assets such as stocks. That said, inflation does not necessarily lead to a rise in the value of any particular asset, and asset allocation should be considered based on each individual's own risk tolerance.