Ok. Apologies if this is teaching you to suck eggs, but I’ll start with the concept of and build up from there.
Roughly speaking inflation is where the purchasing power of money reduces, in other words it costs units of currency to purchase the same basket of stuff.
When the official inflation rate is measured the statistics agencies look at the cost of purchasing a pre-defined collection of goods and services, and keep score by reporting on the movement on how much that collection of stuff costs to purchase this period versus the last.
Since the Great Recession we’ve lived in a world where there has been hardly any inflation as measured by the officially published figures, certainly by historical standards. This has meant there hasn’t been much pressure to buy something today because it might cost more (in real terms) to purchase it tomorrow.
As the cost of stuff hasn’t increased much, similarly wages haven’t gone up much (in fact in many places they’ve actually declined in real terms).
With me so far? Good.
Now think about what has happened over the last 10 years with price of stocks. The S&P500 is today valued at more than 60% above what it was 10 years ago. However over that same time period the value of the economic output of the US, its GDP, has increased by ~25%.
This suggests that while the price of the economic output has increased some, the price of the companies creating that output (roughly speaking) has increased a lot more. Or to put that another way, the price of the investments has inflated over that period when compared to the value of underlying assets those investments represent.
The same is true of property prices in many large markets, for example Toronto, Sydney, and London.
The question is if the official inflation rates aren’t reporting much in the way of price rises, yet the prices of our investments have clearly surged, then isn’t inflation actually just showing up in a different place?
To explore why this would be a bad thing consider a typical suburb full of McMansions. If all the houses in the suburb increased by 20% then the home homes do the victory dance and feel richer. However (unless they want to move someplace else) they are actually no better off because the house they would move to has gone up by just as much as the one they live in now.
Now if everyone is frugally saving for their retirements, all drip feeding their hard earned (not really increasing) wages into the markets, but the prices of the investments are steadily increasing, then the higher the prices go the less value each increment investment purchase is finding… a nominal sum purchases fewer units at a higher price. This is just dollar cost averaging at work, and people will mention things like Shiller ratios to measure this.
To link the point back to your original topic, it is the inverse situation you describe with all the folks who piled in back when the market bottomed in 2008, then rode the bull market up until the could FIRE today. Back then they were able to buy loads of units for that same nominal sum.