In the current rapidly evolving economic vertical, remaining ahead in terms of finances is essential. One of the formidable foes you may witness is inflation. As prices rise over time, your money loses its buying power, making it necessary to combat inflation with a prudent investment strategy.
Read on to understand what inflation is and what measures must be taken to diligently use an online inflation calculator in India. Also, enlighten yourself about the significant parameters you must be aware of to form an inflation-beating investment strategy.
What is inflation?
Inflation refers to the gradual enhancement in the goods and services costs, lowering the buying power of money. When inflation rises, your money purchases less than usual, impacting your investments and savings.
Why addressing inflation is essential?
Failure to address inflation in your financial plan can eat up the value of your investments and savings over time. Thus, it is vital to account for inflation when planning your life goals, particularly your long-term goals of five years and above.
Stepwise guide for computing inflation
Access an authentic online inflation calculator
To calculate inflation, you may use any authentic online inflation calculator. These calculators are designed to provide you with a clear understanding of how inflation impacts your purchasing power.
Fill out the required details
In the online inflation calculator, fill out the initial cost or price of a particular product or basket of goods and services. Moreover, you will be required to input the current cost of the same product or basket.
Find the inflation rate
Once you input the necessary data, the inflation rate calculator will compute the rate for you. This rate is essential in understanding how much prices have increased over a specified period.
Review the results
The calculated inflation rate will assist you in understanding the effect on your investments and savings. It will guide you better in making well-informed investment decisions linked with your investment strategy and financial plan.
Although using an inflation calculator online can give you a rough estimate of the investible amount, for sound decision-making, be sure to consult a certified advisor. They can help you understand the appropriate investible amount you must invest to reach your inflation-adjusted corpus.
How to create an inflation-beating investment strategy?
Consider investing in equities
Allocate a particular portion of your investment portfolio to equities. This is because, historically the stock market has shown great resilience against inflation, endowing the potential to generate higher returns than traditional asset classes. Equities represent ownership in enterprises and as the business performs better and grows, so does their share value.
In India, where economic growth has been vigorous, investing in diversified equity mutual funds and well-established stocks can assist in beating inflation over the long run. However, it is important to perform in-depth research or seek certified professional recommendations to make better equity investment decisions.
Diversify your investment portfolio
Consider diversifying your investments across distinct asset classes like bonds, stocks, commodities, real estate, etc. Diversification can assist in lowering risks and enhance the potential for generating returns, thereby providing a hedge against inflation.
Monitor and adjust your investment portfolio
Periodically assess your portfolio to make sure it aligns with your goals and risk appetite. Adjust as required to remain ahead of inflation and changing market scenarios.
Understanding the impacts of inflation on your financial stability is the initial step toward devising a pragmatic investment strategy. By focusing on equity investments, diversifying your investment portfolio, and monitoring your investments periodically, you may not only protect your investments from inflation but even attain your long-term financial goals within the estimated deadline.