Purchasing power is defined in two different ways — one is economical, and the other is investment-related. In economic terms, purchasing power represents the value of goods or services that one unit of currency can buy. Purchasing power is degraded over time by inflation. $20 today buys fewer groceries than $20 five years ago. Additionally, a five year 6% bond bought today doesn’t factor in purchasing power five years from now.
In regards to investments, purchasing is the amount of investments that can be bought on margin. For example, if an investor has $10,000 in their account with a 50% margin, the investor can actually purchase $20,000 worth of investments.