Hyderabad: There are many financial goals to be achieved in life. For this, some amount of earnings must be allocated for investments. There is an opportunity to create wealth with the income from these. But, rising inflation keeps reducing our net income. Hence, it is always necessary to choose investments that do not have much impact in the long run.
Currently, the price increase in our country is more than expected. This high inflation causes the value of investments to depreciate rapidly. For example, suppose an investment scheme earns a return of seven per cent. If inflation is six per cent.. the net return is only one cent. So, while choosing any investment scheme.. make sure that the average return is at least two to three per cent above inflation. Only then you will be able to achieve the intended goals.
Gold is inflation resistant investment
Gold is the first thing that comes to mind when it comes to inflation-resistant investment. All economies are believed to be weak in hyperinflationary conditions. The returns from gold may not always be high. However, it can be termed as a reliable investment when uncertainty is high, such as in war. Choosing it with a long-term strategy is likely to yield good returns. Buying gold directly, gold exchange-traded funds and sovereign gold bonds (SGB) can be considered for this. Investing in SGB gives a 2.5 per cent annual return. There is no capital gains tax on the amount received after the expiry of the period.
In equities...
Stock market-based investments means whether you invest directly in shares or choose equity mutual funds there is some risk. These fluctuate in the short term when inflation is high. They respond quickly to market conditions. The stock market offers many opportunities to investors in the long run. If you want to invest in equity funds and shares, it is better to opt for a Structured Investment Scheme (SIP). This gives an average benefit of money and fear of loss also decreases. Similarly, diversify as much as possible while investing in equities.
Equity-based investments should be chosen only after having a clear understanding of your risk tolerance and return expectations. All the available money should not be allocated to these. These can provide returns that exceed inflation only when held for a long period. For those who are new to the market, instead of investing directly in shares, it is better to look into mutual funds.
Also read: Tolerance of high inflation was a necessity: RBI Gov
Real Estate Investment Trust
Gold can be bought directly or digitally. Similarly, direct investment can be made in real estate. Apart from this, you can also invest through digital. Real Estate Investment Trust (REIT) can be chosen for this purpose. When inflation is high, the prices of construction materials tend to increase. Banks also increase interest on home loans. Due to this, we can see the growth in real estate prices also. As a result of all this, rents also increase. So, investing in REIT during such times is likely to fetch good returns. It is possible to invest in REIT even with a small amount. These work like mutual funds as the funds collected from investors will be invested in shares. REIT will invest in real estate that provides income. Before opting for REIT it is important to know what assets are held by it. It is best to choose these while keeping your long-term goals in mind.
In short-term debt schemes
Long-term debt schemes will be adversely affected in the case of rising interest rates. In this context, those who invest in debt funds should consider short-term debt schemes instead. An increase in interest rates will not have much impact on ultra-short-term debt funds and liquid funds. During high inflation.. you can invest your surplus in short/ultra short-term debt funds. The performance of investment schemes is never the same. Strategies should be adapted to changing conditions. Don't forget that risk tolerance, age and future goals are key factors in selecting schemes, opines Adhil Shetty, CEO, bankbazaar.com.
