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Financial Planning
Inflation explained: Why your ₹100 buys less every year
Did you know that the value of ₹100 today won’t be the same next year? That’s the silent effect of inflation.
What is inflation?
Inflation is the phenomenon by which money loses its purchasing power over time. For example, if a litre of milk costs ₹50 today, at 6% inflation, it could be priced at ₹53 next year. In the larger scheme of things, left idle, your cash loses its worth to inflation with each passing year.
Why should you act now?
If your savings are parked in a simple savings account earning 3-4% interest, inflation still eats away a chunk of it. The average inflation in India has hovered between 4 and 7% over the last decade.
So, by not investing, your money is losing value every single day. Want a reality check? If 10 years ago, a family’s monthly grocery budget was around ₹7000, now it would be over ₹12,500 at a rate of 6%.
Smart ways to shield your money
- Invest in Equities: Stocks and equity mutual funds come with the best chance to beat inflation over the long term. Indian equities produce an average return of 10-12% annually, which is well above inflation.
- Utilize Debt Instruments: Try diversifying with debt mutual funds or recurring deposits that can provide slightly higher returns than regular savings accounts.
- Diversify with Gold: During periods of high inflation, gold prices usually rise. Opt for digital gold, gold ETFs, and sovereign gold bonds, and steer clear of the hassle of owning physical gold.
- Real Estate: Property values are seen to rise with inflation. Even if you’re not buying now, keep track of the real estate trends when you plan for a future investment.
Conclusion
The right investment today means future-proofing your lifestyle tomorrow. Safeguard your earnings, beat inflation smartly, confidently, and early. Opt for investments that help you meet your goals and risk appetite. Let your money grow, not just sit idle.
Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.
Mutual Fund investments are subject to market risk. Please read all scheme-related documents carefully. Axis Bank Ltd. is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Any purchase of Mutual Funds by Axis Bank’s customer(s) is purely voluntary and not linked to availment of any other facility from the Bank. This content is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future returns. Readers are advised to consult a qualified financial advisor before making any investment decisions. Terms and Conditions apply.
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