One of the most ignored demons in the financial world is inflation. It is ignored despite the fact that it can silently nibble away your savings and investments and has the potential to wreak havoc with our financials. We tend to underestimate how inflation can make a huge dent into our savings without even us knowing it!.
Inflation is a sustained rise in prices of general goods and services over a period of time. In simple terms, inflation reduces the value or purchasing power of your money.
Let us see how inflation erodes the purchasing power of our savings over the long run –
This is exactly how inflation demon eats into our savings over the years.
But how to stay protected from this demon?
Saving is not enough, so we need to invest our hard earned money in assets that can help us beat the inflation. By earning higher Real Returns (Actual Return – Inflation Rate = Real Returns) on investments, we can not only beat inflation, but also build a large corpus.
Higher the real returns, the better it is.
Want to know which are the assets that have managed to generate higher real returns and have also helped generate wealth over the long run?
Check out how different assets have performed over the last 20 years when the average inflation rate hovered around 6.9% p.a.
Thus by keeping money lying idle in your deposit account, would not have barely managed to keep pace with the price rise, forget about wealth generation.
But investing is not just about managing our expenses, right? It is about meeting our dreams and aspirations like going on a long vacation with family, providing for children’s higher education and marriage, having an early retirement.
To achieve these goals, we need to identify an asset that has the potential to beat inflation and create wealth over the long term.
We see that savings and fixed deposits have not managed to beat inflation. So, if not FDs, then where should one invest?
In equities, of course!
This asset class has managed to not only beat inflation but also generate higher real returns in the long run. Equities have managed to generate real returns of more than 5% over this period. Amazed, right?
But does the lack of expertise making it difficult for you to select good stocks and the right businesses keeping you away from investing in equities?
Don’t worry equity mutual funds are one of the best investment options as they not only offer diversification by investing in various stocks and sectors, but are managed by experts having professional experience and expertise. This should put all your worries to rest.
Want to get started?
You can either opt to invest at one go if you have money lying idle in your bank account, or start investing in small amounts regularly through SIP. With regular investments, you can beat inflation and create wealth with ease.
So go ahead, take the first step and start investing with IndusSmart today !