As you comprehend the effects of inflation & analyze how deep a hole has it dug in your pockets, it is the time you start taking steps to protect your investments from the soaring inflation.
So in times of high inflation it necessary to redesign one’s portfolio strategy so as to include some inflation hedged investments.
1. Gold: While precious metals in general are a solid bet, gold in particular is seen as a hedge against uncertainty yielding higher value. It is also advised that investments in gold mining stocks are even better hedge against inflation.
2. Hedge with right portfolio mix: Finding good inflation hedges is tough. Traditionally a portfolio mix consists of:
a) A low risk fixed income element, like-fixed income securities i.e.- bank or company fixed deposits, bonds etc
b) A medium to high risk speculative element which will yield capital appreciation i.e.-equities, mutual funds etc
3. Avail the indexation benefits: Capital gains from debt-oriented mutual fund schemes after inflation indexation may not attract taxes. Also, long-term gains from equity and balanced funds are already tax-free.
4. Invest in Stocks: Equities have in the past shown better returns in the long run compared to traditional fixed deposits instruments. Invest in the stock of companies that have been performing well, as an average return of 15% is not unusual to expect in long term out of it.
5. Invest in Foreign shares: If your country is witnessing high inflation, then invest your savings in foreign shares that pay good dividends. Even in the case of global inflation, currencies and assets do not depreciate at the same rate. You will be much better off if you diversify your risks amongst different territories.
6. Cut down on cash holdings: Money loses its purchasing power during inflation. The assets you can purchase out of it rise in value comparatively. Hence, holding it without any proper investments will erode its power.
7. Start investing early: Planning in advance for your future expenses like your child’s education or his/her marriage enables you to get an upper hand over the inflation. The benefits of compounding in early investments can be good hedge against inflation
These broader options suggested here have lot of finer details to be considered while protecting your investments against inflation. Consult your advisors to know more about the various inflation hedged investments available to you & plan wisely to get rich.
So in times of high inflation it necessary to redesign one’s portfolio strategy so as to include some inflation hedged investments.
1. Gold: While precious metals in general are a solid bet, gold in particular is seen as a hedge against uncertainty yielding higher value. It is also advised that investments in gold mining stocks are even better hedge against inflation.
2. Hedge with right portfolio mix: Finding good inflation hedges is tough. Traditionally a portfolio mix consists of:
a) A low risk fixed income element, like-fixed income securities i.e.- bank or company fixed deposits, bonds etc
b) A medium to high risk speculative element which will yield capital appreciation i.e.-equities, mutual funds etc
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| (Image Source: economictimes.indiatimes.com) |
3. Avail the indexation benefits: Capital gains from debt-oriented mutual fund schemes after inflation indexation may not attract taxes. Also, long-term gains from equity and balanced funds are already tax-free.
4. Invest in Stocks: Equities have in the past shown better returns in the long run compared to traditional fixed deposits instruments. Invest in the stock of companies that have been performing well, as an average return of 15% is not unusual to expect in long term out of it.
5. Invest in Foreign shares: If your country is witnessing high inflation, then invest your savings in foreign shares that pay good dividends. Even in the case of global inflation, currencies and assets do not depreciate at the same rate. You will be much better off if you diversify your risks amongst different territories.
6. Cut down on cash holdings: Money loses its purchasing power during inflation. The assets you can purchase out of it rise in value comparatively. Hence, holding it without any proper investments will erode its power.
7. Start investing early: Planning in advance for your future expenses like your child’s education or his/her marriage enables you to get an upper hand over the inflation. The benefits of compounding in early investments can be good hedge against inflation
 |
| (Image Source: economictimes.indiatimes.com) |
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