No matter which city you live in and how much money you earn, you must have realized that prices of commodities and services have been rising at a scary rate. Twenty years back, a cup of coffee cost around Rs 10 but the same coffee in an ordinary café costs Rs 96 or more these days which indicates an increase of 12% in the price of the beverage. Freaky, isn’t it? Well, truth be told, price rise is a bitter reality and it applies on everything that we purchase and consume. Twelve years down the line, the same cup of coffee would cost Rs.375 if the price keeps rising at 12%. Also, the price rise will be swifter and sharper in sectors such as education and housing.
In India, the average consumer price inflation rate has been hovering in the range of 8-9% for several years and it means a consistent decline in the value of money. You might earn more as the years pass by, giving you the impression that you are getting richer but in reality, your earned money will continue to lose value, until you make it inflation proof. You need to take steps to beat inflation and it is possible only if you invest your money in investment products that offer such returns that you are able to keep pace with the price rise.
Traditional investments can’t beat inflation
For many years, people had been parking their money in bank fixed deposits (FDs), recurring deposits (RDs), property and gold. It was almost twenty years ago, that these traditional investment options were considered to be the best bet as they were safe and offered good returns, but, not any more. The returns have failed to match steps with inflation and nowadays, investment in these options means negative returns. Even property is not a high-return investment as the real estate sector is a very volatile sector where nothing is predictable. So, what is the right option?
New-age investments can fight price rise
Equity offers to be a promising investment option in the inflation-ridden times that we are facing. If you park your money in equity mutual funds, you stand to get a return of 14-16% which is fairly sufficient to beat the inflation moving up at 8-9%. The high returns will ensure an increase in the value of your money over time. In case, you are worried about the market risks associated with equity funds then you would be relieved to know that these funds are managed by finance experts who keep a close eye on the market developments. They channelize your funds with the aim of optimum returns which eliminates the risks to a large extent. Also, you can invest in a variety of mutual fund schemes as per your risk appetite.
Financial planning is a must
Well, you can combat inflation by investing in equity funds but it should be done after proper evaluation and analysis. Investing in any or every mutual fund scheme or going by what others are investing in is not the right way to invest. Every individual’s earnings and needs are different so what works for one may not work for another. Essentially, investment should be planned, keeping in mind the future goals and the present conditions. So, you should take your time and do proper homework before putting your money in any investment product.
Inflation is a reality that stares you in the face every passing day and you can turn a blind eye to it only at your own risk. If you want to secure your future, you have got to tackle it hands-on. So, take the bull by its horns and start putting your savings into smarter and high-return investment options such as equity funds.