Tips for wise investment during inflation

In an era of uncertain environment for investment, here is an attempt to put together some ways that will help you in making a few wise decisions to ensure that inflation does not affect your most significant financial goals – including the child’s education and your own retirement and medical expenses.

Avoid Carrying Cash

Try keeping minimum cash in hand and use it for monthly bills of unavoidable essential purchases like milk, provisions and vegetables. Reserve isle cash for unforeseen circumstances – let it be in the bank instead of your carrying it in the pocket. This will help you in avoiding impulse buying.

Bank Deposits

The first savings, mostly unintentional, in anyone’s life begins with a bank account. Remember that you earn interest on whatever amount you deposit in the bank account.  See this interest as a reward for not spending now. You can earn more interested in form of Recurring Deposit (RD) and Fixed Deposit (FD).

Mutual Funds

Many salaried people and small traders are a little wary of the products coming from mutual fund companies. It is to be noted that mutual funds are safe and are liquid in nature, which means they can be converted into cash within a short period of time. One can also see how they are performing on a day-to-day basis as they are listed in the stock exchanges. The returns from such funds are better than bank deposits, if held for a longer period.

Share (Equity)

For a small investor, this is by far the best bet in terms of revenue, but not really in terms of security. If you can acquire knowledge of the share market or have a sound advisor, it may turn out to be a good investment. Note that for short-term holdings, equity may not come up to give the returns or growth that one anticipates. Hence, during inflation buy shares that expected to perform well and give better returns if bought for longer durations.

Real Estate

This sector can be one of the investment avenues, but it can behave strangely at times. If the realty market is on upswing, returns are good. Even rental income can go up. However, since a sizeable investment is needed in real estate, a small investor is advised to invest in small-sized commercially shops or buy small piece of land (25050 yards).

Inflation-Indexed Securities (IIS)

This is a new savings plan to be introduced by the RBI shortly. It is a debt instrument and returns are inflation-adjusted to give you redemption after 10-years wait. This will be an optional product to combat inflation.

Gold, e-Gold and Gold ETF

Gold prices are always high during festive season and weddings. Hence, this is a good time to invest in ornamental gold, e-gold as well as gold ETF (for investment) and reap benefits when gold prices rise again.