Diversified investment portfolio helps us to absorb shocks of inflation and slowdown

Inflation is hovering above 6 percent in India in recent times. In such times, it is necessary for us to look for investments that yield maximum returns so as to overcome rising costs in future. Take a look at how diversified investments, precious metals like gold and silver and systematic investment plans (SIPs) get us assured returns despite inflation and economic slowdown.

Hyderabad: Inflation has become a matter of great concern for all of us in recent times. The rate of inflation has been staying above 6 percent in India for the last several weeks. Against this backdrop, the investors should look for policies that would bring higher returns over and above inflation. Only then, they can withstand the rising costs in future.

The general tendency is to invest in all sorts of policies that bring immediate returns. Many people aim at short term gains rather than long term returns, which eventually leads to a weak investment portfolio. There is no definite plan to select policies for investments that can withstand inflation. But some strategies will help us to prevent the impact of inflation on our investments.

Diversity in our investment portfolio is a sure way to combat inflation. The impact of price rise differs with each and every policy. Investors should carefully understand this. In times of fluctuations in the market, the risk factor can be minimised by opting for a wide variety of investments. Without restricting to one geographic region, money should be put in the markets of different countries.

Any investment should be in such a manner that it should yield some considerable income despite the pressure from inflation. At the same time, the investors should enhance their capacity to absorb risk and, accordingly, make their financial plans. The plans having the threat of higher risk may not suit all people well.

Investing in precious metals is a hedge against risks of inflation to a large extent. When we look at history, we can see how metals like gold and silver withstand the impact of price rise. The two precious metals have an inalienable connection with the Indians since ages in terms of both socio-economic and psychological factors. Hence, investments can be safely made in gold and silver ETFs (exchange traded funds). Moreover, the performance of these ETFs is not affected by equity and debt mutual funds. In times of economic slowdown, these precious metals are the best investment option.

Every investor should keep in mind that only when their investments earn maximum returns, they can overcome the impact of inflation. For this, equities are one option. With a strong awareness of stock market and a constant watch, we can select shares that are highly reliable. At the same time, it is not gainful to simply select shares of some companies and add them to the portfolio. In such matters, one should control emotions.

Alternative mutual funds can also be preferred. By investing in the systematic investment plans (SIPs), assured returns can be earned in the long term. At the same time, we should keep our expenditure under check and control our family budget while increasing our ability to save and invest in order to escape from the severe impact of inflation.