Protecting wealth against inflation

Protecting wealth against inflation

Protecting wealth against inflation

Impact of inflation

Inflation can be easily regarded as a wealth assassin, slowly eroding the purchasing power of your wealth over a period of time. Thus, the so called "SAFE" Financial instruments (PPF, Bonds, Bank FDs, Post-office savings scheme, Debt fundsetc) are not really safe because they don't maintain or grow the purchasing power of your wealth if the inflation is higher than the returns offered by these products.

Say for Example PPF & GOI Bonds. Both of these are the most popular financial instruments of India and offer 8.5% while the inflation in India is 10%. So actually these so called :SAFE" Financial products are earning 1.5% return on your investments every year.

Thus, every year the purchasing power of your money invested in PPF & Bank FDs is going down by 1.5% even though it gains 8.5% in numbers.

Thus, smart investors are those who protect their money from the bad effect of the inflation. So How to do that?

Well, I personally give following suggestions to my readers of this blog to protect their wealth from the inflation.

01) Gold -

First is Gold. The gold is the traditional asset class which is inflation proof. If you want to maintain the purchasing power of your hard earned money than simply invest in gold. It will maintain the purchasing power of your hard earned money.

02) Equity -

Equity is the second asset class which can protect and even grow your wealth by beating the inflation. However, for that you will have to invest for the long time horizon say 5 years or even 10 years and more.

03) Start your own Business -

What you can do is, You can start your own Business out of scratch and invest your hard earned money in your own Business. The business is the asset class which can beat the inflation very well. And not only this but what I like about owning a private business is that, it can give you a steady cashflow.

Take the Example of this Blog. This blog is my internet business which I started in March 2008 without any investment. My only investment was the investment of my time. I used to spend daily 8-10 hours behind this blog to write informative posts on personal finance. And today this blog business is giving me a steady monthly cashflow on which I can live very well.

Thus, be the smart investor and protect your wealth from the inflation.

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