Learn to Beat Inflation in India Best Ways to Beat Inflation

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In 5-10 years, most subcategories of debt mutual funds have returned anywhere between 7-10% across all categories. The returns from real estate investments have been around 9% for ten years, based on several media reports and studies published by real estate agencies in India. However, investing in real estate requires a considerable capital investment, running into a couple of lakhs or crores. Real estate is both a real asset and an appreciation-oriented one. Like commodities, land and property values tend to rise alongside inflation.

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It allows you to earn consistent returns regardless of inflation. The capital in this type of investment is directly proportional to inflation. It means that as inflation rises, your capital amount will go up. The current interest rate is mostly higher than what was promised at the outset of the investment. The best feature of IIB is that even in the face of deflation, your capital is not lost; only your interest income is reduced. Parking your money in a bank deposit that gives you 7-8% returns when inflation is 5% is not actually earning you any returns.

Why investors use gold as shield against inflation

The IT majors came out roaring with excellent Q3FY22 financial results. Considering their exposure to mutual fund portfolios across the board, this solid performance is good news for your investments and wealth. IT is also a significant employer in the country and this performance indirectly bodes well for the overall economy.

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Why is Bitcoin being touted as a hedge against inflation, and can it really offset the diminishing value of fiat currencies? On a rolling return basis, the index has given return of more than 15 per cent per annum for 60 per cent of the time for a 10-year investment horizon. For a 7-year investment horizon, the index delivered an annualised return of more than 15 per cent per annum for 48 per cent of the time. In practice, the impact of inflation on earnings will vary by sector and its ability to pass on higher input costs to consumers.


In this context, the government is trying to curb imports by increasing the duty on the precious metal to make it less attractive. Identify the personality traits and behavioural patterns that shape your financial choices. Nestle too has always been a frontrunner in this aspect and is known to launch innovative and game-changing products globally every now and then. Their plant-based meat products and science-based nutritional concept for porridge products are some recent examples. Nestle is one such company whose earnings have been fairly stable over the last five years. For instance, Nestlé India is a dominant player in the Indian consumer food FMCG industry and holds one of the top two spots across most product categories in its portfolio.

Selita notes that inflation makes it cheaper to service – that is, pay – some types of debt, as long as it has a fixed interest rate. In the same way that inflation eats away at the value of your cash, it also eats away at the value of your loan. This benefits individuals that have acquired loans or mortgages in the past, before the period of inflation set in. But some bonds, like US Treasury Inflation-Protected Securities , have interest rates that are indexed to inflation.

This would mean that investments in any asset that offer returns below 5% are actually making a loss in their purchasing power each year, relative to inflation. That would include even the safest and most basic of investments – fixed deposits. Even other safe investments like money markets and debt can also suffer from this loss. The only hope is that in the long term, the inflation rate might stabilize and the investments will start providing positive returns.

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In contrast, offices in IT parks/ business zones give returns in the range of 6-8 per cent. Commercial offices in many sought-after CBDs can give a higher yield of 7-9 per cent. Shops in malls and shopping complexes can give a yield of up to 9 per cent. Other assets such as warehouses can also give a competitive return in the range of 5-6 per cent.

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For example, a chocolate bar sold for 20 rupees two years ago is selling for 30 rupees today. Investment in gold is traditionally considered the best hedge against inflation. Its prices rally during a high inflationary economic scenario.

That means that their interest payments go up with the arabs in pakistan rate – and down with deflation – ensuring the payments’ worth isn’t too badly eroded. So while inflation impacts all investors, it’s especially tough on income-oriented investors. Inflation is the term used to describe the steady rise of prices for goods and services that affects all areas of the economy. Inflation lowers the value of cash savings and fixed-income investments. Ravi Singh said that equities tend to do well in inflationary environments because corporate earnings also grow strong, especially in cyclical industries. Some sectors like energy, power, FMCG and pharma have always delivered good returns in such scenarios.

  • In an inflationary scenario usually, the bond market is struck more than the stock market.
  • Gold is popularly considered as the best hedge against inflation.
  • However, it boils down to an individual’s outlook of the situation and time at which they wish to invest.

Update your mobile numbers/email IDs with your stock brokers. Receive information of your transactions directly from Exchange on your mobile/email at the end of the day. Sovereign gold bonds come with an added advantage of tax-free returns at maturity, in the form of capital gains. These also offer an annual interest return of approximately 2.5%. Currently, we can see that the prices of products/services are on a rise in the Indian economy. Here, we will discuss gold as a hedge against inflation to understand whether it makes sense to consider this investment in the current scenario.

Over the last five years, Sensex has returned more than 15% CAGR as of April 2022. However, Individual stock performance may differ from benchmark index performance. Turned old against inflation is the question that pops up as its prices are range bound when the inflation is going up globally. It is a known fact that the value of money, more often than not, decreases with time.

gold bonds

Regarding returns, gold has proved to be a lucrative avenue. Over the last 10 years, the asset has yielded absolute returns exceeding 60%. Gold prices are consistently increasing, appreciating the asset over time. Once you have your fundamentals in place, it’s also important to stick to them.

  • Does it ever make sense to own multiple life insurance policies?
  • Investors not wanting to invest in individual stocks can look at equity mutual funds.
  • Most equity funds’ 5- and 10-year returns have remained consistently above 10%.
  • Equity investors may underperform in the shortterm and eventually make up for lost time, whereas those exposed to bonds may outperform in the short term but plateau in the long term.
  • One of the most common contributing factors to inflation is the rise of the money supply within the economy.

There are more than ten subcategories in https://1investing.in/ funds, all varying in their risk-return potential. Resorting to debt-oriented investment to hedge against inflation depends on returns and your risk appetite and goals. Bonds or debt funds that invest in bonds are linked closely to interest rates in the economy, which works closely with the inflation rates. It depends on how long you stayed invested and whether you have invested in equity mutual funds, debt mutual funds or hybrid funds.

In the long run, as inflation comes back in control, the US Fed rate may decline and this can be positive news for gold prices. Gold continues to act as a cushion during uncertain and turbulent economic conditions. For instance, we saw that gold prices rose during the Ukraine crisis. Although they have dropped back from the March highs, investors have earned close to 11% since the last year. For the novice, inflation means a general rise in the price levels of products and services.

This will ensure greater returns in comparison to the inflation rate. Hedging against inflation can protect an investment’s value. Certain assets can offer a good return, but they can be sold at a loss after inflation is taken into account. For example, if you start Investing in a stock that returns 5%, but inflation is 6%, you will lose 1% of your investment. Inflation-hedging assets may be self-fulfilling as the investors flock to them, keeping their prices high even though their actual value could be significantly lower. For example, stocks, commodities, real estate, and cryptos have historically been good hedges against inflation because their values tend to increase along with the inflation rate.

The rate is subject to change every 6 months but the bond will always pay 0.35% higher than NSC rate. Simply speaking, commodities are tradable raw materials or agricultural products. Metals, oil, grains, pulses, spices, and natural gas are all examples of commodities.

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