Money9 Helpline | How to make investments inflation-proof?

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Inflation is one of those market phenomenons that can be expected with near certainty over a period of time. Economic progress is often accompanied by inflationary pressures. Inflation occurs when there is an excess of money in the market. This is followed by an escalation in the price of goods.

Inflation impacts your monthly expenditure and investments in equal measures. The speed of wealth creation can experience a few bumps due to the rise in the price of goods. This is because you plan your future financial goals as per the current market scenario. A decade from now, your investment may fall short to meet your needs after adjusting inflation at the point.

Thus, it’s clearly important to protect your investments from inflation but how can you do it? Money9 Helpline hosted Hemant Rustagi, CEO at Wiseinvest Pvt. Ltd. to answer queries related to the same.

Here are some questions:

Piyush Lalani, Gujarat: I invest Rs 11,000 in ELSS. I have shares worth Rs 8 lakh and FD for Rs 13 lakh. I want to increase my MF investments. Since I have already invested in equities, will a debt fund suit my portfolio? I want my returns to beat inflation. 

Rustagi: When we talk about financial assets, you have the option of equity, debt and hybrid funds too. However, the key decision here isn’t about choosing between equities and debt. You need to understand your financial goals and requirements first and invest accordingly. Time plays a critical role here therefore decide the duration for which you’d like to stay invested and then choose the fund.

If you’re planning to invest for the long term (10-15 years), you can encounter some struggle to beat inflation with debt funds. Hence, hybrid or equity funds are more suitable in this case.

Anil Patel, Palanpur: I’m a farmer and work for APMC. I have invested in gold, bank and post office FDs. After a good harvest, crops are sold at a great price and I get good money. If I want to invest a lump sum into MFs, what is the best option?

Rustagi: Before investing any amount, get your basics about two things right: what is the financial goal you want to achieve from this investment and how much time will you give it? Once these primary things are sorted, choose to invest as per your needs. But remember to not cheat on your regular expenses to invest in mutual funds or anything for that matter.