An increase in price or inflation is nothing more but a downfall in an individual’s purchasing power which reduces the value of their money. It increases the value of what they need in the future and that’s why experts advise focusing on the net returns of inflation before making any kind of investment.
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While parking funds in 'safe' avenues is the most desirable solution – it is important that individuals fully understand the nature of the product before investing.
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To make planning easy for an investor – here are some of the key avenues that are statistically known to beat inflation in the long run are:
Direct Equity or Equity Mutual Funds
According to Palka Chopra, senior vice president, Master Capital Services, historically medium or long term investment in equity have given the highest returns amongst all other investment options which were available in the industry.
The returns not only beat the inflation, Chopra believes, but also help to create wealth.
Gold/ precious metals
As per Saurav Basu, head - wealth management at Tata Capital, gold is one of the best instruments to invest in when looking out for an inflation hedge.
"Considering that gold is not very affected by currency rates – the effects of inflation on this tool are almost minimal. In fact, the price of gold is also directly proportional to the rate of inflation. Investing through SGB/gold ETF could be a good option," Basu suggests.
Real estate
In order to hedge against inflation, Chopra also advises people to invest in real estate.
However, this should be done for the long term and one should not make over one-third of the total allocation to real estate.
Here are other tips for investors looking to beat inflation:
Additionally, individuals should understand that the rate of inflation is different in each country of the world – depending upon the money market and economic factors in each location.
So, Basu of Tata Capital suggests individuals to diversify their portfolios and incorporate securities from different locations.
Also read: Should you invest in IPOs for long term?
"This will strongly help them in maintaining a balanced portfolio that can cushion the effects of any kind of country-specific inflation without causing major financial distress. Global exposure can be done through Fund of Fund route or LRS,” Basu explains.
Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.
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