Beat Inflation with these Simple Tips of Investments

Highlights: You can make long-term investment in Equity Mutual Funds because they give better returns after long period of time.

Sky-high inflation can defeat our income very badly. We can not save enough money for our future goals. That's why, it is necessary to invest your surplus funds in a manner that you can easily outperform inflation.

Here are the simple tips for earning real returns and to achieve future goals.

• Real Rate of Return: To outperform inflation, we have to follow the rule of Real Rate of Return. Real rate of return is the return after adjusting inflation. For example, if you invested Rs. 100 today, then you will get Rs. 110 after 1 year. You also know that the thing which cost Rs. 100 today will costs you Rs. 108 after 1 year. Then, your Real Rate of Return will be 2% only.

• Calculate the Inflation: Personal expenses increases year by year with average rate of 10-12% per year. Expenditure in medical and education also increases. In such conditions, whenever you decide your long-term goals, keep the average rate of inflation between 8-10%.

• Fixed Deposit: It is the traditional way to investing surplus funds with assured returns after maturity. It can be considered as Safe and Secure investment as it does not depend on market but it gives you very less returns in future.

• Debt Funds: Debt Funds is much better than Fixed Deposit. You can invest in Debt Mutual Funds which has less market impact as compared to Equity Funds. Bonds, Debentures and Government Securities are debt instruments. There are various Debt Funds available to achieve your various goals.

• Equity Funds: Make equity as a part of your investment planning as they gives you higher returns. Equity Mutual Funds are mostly suitable for long-term investments. They can give you 12-15% average returns.

• Gold: Traditional Indian people believe investment in gold for securing their future from financial crises. Gold works as haze against inflation. But if inflation increases with the rate of 6%, it would be better to invest in Equity/Debt as they are able to give you higher returns.

• Rental Income: If you have your own premises which is not usable for you, it can leased or rented to someone need it. You can also increase rent year-by-year as inflation increases.

• Diversification & Inflation: It is very essential to keep diversification in your portfolio. It helps in reducing risks. It means you should invest your funds in different asset classes. If one perform badly then other will overcome this loss.

Source: Web