Inflation has shaken the world including India. Its impact has reduced the purchasing power of the common man. The return on investment is not keeping pace with the rate of inflation. Retail inflation in the country stood at 7.79 percent in April 2022, an eight-year high. In May, it fell slightly to 7.04 percent. However, the inflation rate still remains above the Reserve Bank’s ideal level of 4 per cent (+2/-2) for the fifth consecutive month.
What does it mean to beat inflation? Beating inflation simply means when the return on investment is more than the inflation rate. If the increase in the prices of goods and services is more than the return from the investment, then such return is meaningless i.e. the return is zero. How to beat inflation in India?
Inflation is increasing day by day. It is obvious that the rate of inflation in the next 10 or 20 years will be much higher than that of today. The best way to beat inflation is to invest in avenues in which there is a possibility of getting returns equal to or more than the inflation rate. Experts agree that small savings schemes do not have the potential to deliver that much return.
The interest rates of small Savings Scheme have also come down in the last few years. In such a situation, the stock market has the ability to give attractive returns in the long term, which can beat inflation.
There are two ways of investing in the stock market. You can invest directly in the market. However, for this you should have knowledge of the market. There are several sites which offer trading facility in stock market. 5Paisa.com is one such platform where you can trade easily, safely, and in your own language. You can visit 5Paisa.com to know more. The stock market has given better returns than inflation in the long term. However, there may be some volatility in the short term. With good research and investing with a long-term goal in mind, the returns coming from the stock market can help in combating inflation. If the stock market risks scare you, then the equity mutual fund route can be taken. A large fund can be created by investing regularly in mutual funds through SIP. Mutual funds can give better returns than expected in the long run. Choosing the right fund is essential for investing in mutual funds. You can also take help of a financial advisor for this. To deal with high inflation, build a long-term (seven years or more) portfolio, with a higher proportion of equities.
Download Money9 App for the latest updates on Personal Finance.