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Inflation is simply the rising prices of products and commodities over time. This very subject is a matter of major concern to everyone, be it a retailer, a businessman, government, consumers, or investors.
If we look at the numbers, in India, the inflation rate started going up in September 2021 when it was 4.35%, reaching 6.01% in January 2022. It almost doubled in just 4 months!
A matter of concern is that if inflation continued rising this way, it will surely become a value destroyer for everyone. To investors, they must build an investment portfolio that is inflation-proof!
In the way to build an inflation-proof investment portfolio, it is essential to draw up the right investment strategies. In this way, an investor would be able to beat the inflation or at least try to minimize its impact on their wealth creation project.
What Is Inflation?
If we define inflation practically, then, ask yourself, do one rupee today will buy the same value of goods, it bought five years down the line? The answer will be no! Inflation measures the average price level of a basket of goods and services in an economy over a given period.
Why Does Inflation Occur?
There are many reasons why inflation occurs. For the current hike in inflation rate in India, the plausible reasons are supply shocks due to the pandemic which disrupts production, high oil prices, rise in production costs, etc.
Well, an investor who aims to create an investment portfolio that is inflation-proof, should pick up investment tools that retain the capacity to give inflation-beating returns. Below we are discussing some of the investment tools that one can include in their inflation-proof portfolio!!
Equity Mutual Fund, All Time Inflation Beater!
Equity mutual funds are favored because they have outperformed other asset classes and generated inflation-beating returns over long-term investing. It is advised to retail investors that if they want to take short inequities they take the route of mutual fund investing that too via SIP (systematic investment plan) for the long-term.
Therefore, we advise that before the inflation takes the surge, visit your portfolio, and add some equity exposure to it, for this go add a few consistently performing equity mutual fund schemes linked to your long-term goals. Do not forget to diversify your equity fund portfolio across different market caps and sectors, but with proper strategy.
For those who prefer taking part in equity growth by investing in the stock market, I would like to suggest you, do not wait for a market dip. ‘Now is the right time to take part in market investment. Remember at what time you invest is not responsible for creating wealth, instead of how long you invest is!
Stock markets do not travel in a linear route and there can be several dips and spikes over a long period. You can use a dip in the markets to add more money to your portfolio but it is just not worth waiting for a market dip to start investing.
Gold, Silver Another Way To Deal With Rising Inflation!
Gold is a real, physical asset, and tends to hold its value for the most part. Silver, again another precious metal, has a lot of industrial value (apart from jewelry usage) as it is an important component in electronics and emerging technology products. As far as investors are concerned, instead of buying gold in physical form, one can buy gold and silver exchange-traded funds (ETFs).
Last but not the least, rising inflation has the full potential to eat up your saving and investments if not protected against inflation at right time. So, before inflation decides whether it is transitory or permanent in the economy, reallocate your assets and create a shield for your investment portfolio against rising inflation!
You can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible. Keep reading our article and stay updated with the latest news about Mutual Funds!
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee of future returns).