Currently inflation is soaring at almost 4 years hight as 7.5% + (Figure is not precise). Now for a common man like you and me, how does this increasing inflation hurts your investments?
Are you still thinking about this and looking for a solution? Here are a few points on this..
Whenever you invest any sum of money in any of the financial instrument, you expect a decent rate of return, we call this as ROI (Return on investment). Now whenever you earn the intrest money which is your return on the money is not the actual return. How!!?? Because of Inflation !! , I should try explaining this with one exmaple.
For E.g. You have invested 10000/- Rs. for 1 year in any financial instrument at annual 10% return. At the end of the saving scheme period of 1 year you would expect a return of 1000 Rs. as your income and total sum shold be 11000/- Rs. But if inflation is acting up at 5% then your rate of return becomes 10% - 5% = 5% !! so your actual rate of return besomes 5% only !! and not 10%. So your actual return becomes 500/- Rs. only and not 1000/- Rs. which is just half of your retyrn. So because of 5% inflation your return becomes half of of what you expect.
So what we have to do is, plan your investments such that your savings should not get reduced by inflation but you achieve at least break even point i.e. point of no loss no gain.
Finally i just want to say is, Money making is an art, you have to learn it diligently.
Regards,
Ameya
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