A penny saved is a penny earned. But 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."When looking at investement always focus on what is the real return or the return net of inflation,"
INVEST IN EQUITIES/EQUITY MUTUAL FUND:Investing in equities over a long period is one of the best ways to stay ahead of inflation. Over the last 10 years, the Nifty has returned 16.7% a year compared to the 7% average inflation rate. One can either invest directly or through mutual funds. For small investors, it is advisable to invest through mutual funds, as they are managed by experts.Another way of lowering the overall risk is investing via systematic investment plans or SIPs. The compounding impact of such investments over long periods will help you beat inflation by a comfortable margin.
INVEST IN DIVIDEND-PAYING STOCKS:
One good way of staying ahead of inflation is buying stocks that pay good dividends. Interest rate offered by banks is usually much less than the inflation rate.Just like inflation, dividends, too, can be calculated annually. This figure, called the dividend yield, can be measured by adding dividends received during the year and dividing it by the stock price. The yield must be higher than the annual inflation rate.
ASSETS LIKE GOLD AND REAL ESTATE:
Gold is considered an ideal hedge against inflation. Market experts say real estate can also be an option if one can afford to spend a big sum. However, only a small part of your portfolio should be allocated of these options.
DIVERSIFY GEOGRAPHICALLY:
Asset allocation is critical. In this, one can look at an opportunity is to diversify globally. This will make your portfolio more stable and less vulnerable to domestic volatility and inflation.
INFLATION-INDEXED BONDS:
These bonds are a great way to beat inflation as they are designed to protect both principal and interest.The principal is indexed to inflation and, hence, IIBs safeguard principal from inflation,"Inflation index bonds are widely available securities in the developed markets that offer inflation protection to retail customers."
RE-ALIGN YOUR PORTFOLIO
During periods of volatility and high inflation, it is imperative for an investor to 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 knee-jerk.
INVEST IN EQUITIES/EQUITY MUTUAL FUND:Investing in equities over a long period is one of the best ways to stay ahead of inflation. Over the last 10 years, the Nifty has returned 16.7% a year compared to the 7% average inflation rate. One can either invest directly or through mutual funds. For small investors, it is advisable to invest through mutual funds, as they are managed by experts.Another way of lowering the overall risk is investing via systematic investment plans or SIPs. The compounding impact of such investments over long periods will help you beat inflation by a comfortable margin.
INVEST IN DIVIDEND-PAYING STOCKS:
One good way of staying ahead of inflation is buying stocks that pay good dividends. Interest rate offered by banks is usually much less than the inflation rate.Just like inflation, dividends, too, can be calculated annually. This figure, called the dividend yield, can be measured by adding dividends received during the year and dividing it by the stock price. The yield must be higher than the annual inflation rate.
ASSETS LIKE GOLD AND REAL ESTATE:
Gold is considered an ideal hedge against inflation. Market experts say real estate can also be an option if one can afford to spend a big sum. However, only a small part of your portfolio should be allocated of these options.
DIVERSIFY GEOGRAPHICALLY:
Asset allocation is critical. In this, one can look at an opportunity is to diversify globally. This will make your portfolio more stable and less vulnerable to domestic volatility and inflation.
INFLATION-INDEXED BONDS:
These bonds are a great way to beat inflation as they are designed to protect both principal and interest.The principal is indexed to inflation and, hence, IIBs safeguard principal from inflation,"Inflation index bonds are widely available securities in the developed markets that offer inflation protection to retail customers."
RE-ALIGN YOUR PORTFOLIO
During periods of volatility and high inflation, it is imperative for an investor to 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 knee-jerk.
Source(Money today)
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