How to beat Inflaton and Protect your investment

Earned money putting in the saving account which worth nothing. Thanks to inflation, over time, the value of the penny saved could be much less than when it was earned. One cannot ignore the corrosive impact of rising prices on investments.

  • For instance, a Rs 1000 earned will be worth just Rs 920 after a year if it is not invested and the inflation rate is 8%. That is why one always has to be on the lookout for investments whose returns are more than the prevailing inflation rate.

Warren Buffett, one of the world’s most successful investors, stresses that “Inflation is the real threat to your savings – and it is stock market investments, or equities, that are best placed to deliver inflation-busting returns”.
In India increasing the rate of inflation make investors to think on “How to beat inflation for extra expenses?”
We can say that investment and Inflation are best friends of each other if one helps other than you are good to go in increasing inflation environment.

To protect your investment and beat inflation few things every investors should keep in mind.

  • What is the Inflation rate of your country and which assets giving return below and above to inflation line?

  • Your Investment horizon should be for longer term.
    • Power of investment is COMPOUNDING which can also help investors to beat inflation.
    • Equity Investment (Large-Cap) and Equity centric MF are the best way to beat inflation and protect your investment.

 

  • List down your expenses and make it to monthly wise and compare with return of your assets.

 

  • Re-align your portfolio and be like an active fund manager.
    • Investor to reassess his/her asset allocationtaking into consideration risk, times horizon and goals. At the same time, it is equally important for an investor to take a long-term view so that his reaction to developments in the market is not blood-cry.
    • For example, if one was to look at the Sensex from 2009 onwards, one might be shocked to find that the index has actually has gone up almost 110% during that time (an annualised rate of almost 17%).

 

  • How to diversify your investments?

 

  • How to allocate the assets at different stage of age and with different risk appetite?

Last two Points will be discussed in detail in further articles.

By Komal Maheshwari

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