One could buy a litre of toned milk for ₹24 in 2010. Now one has to pay ₹49 for the same. This is more than double the price. Significantly, petrol prices which were around ₹28 in September 2000 have touched ₹105 a litre in Delhi.
Likewise, a plate of noodles was sold for ₹25 a decade ago, but now sells for ₹100. A similar phenomenon can be seen in financial investments too. Gold which was available for ₹4,400 per 10 grams in 2000 is now sold for ₹52,720.
In other words, what you can buy for ₹100 today, you will need ₹106 a year later if inflation is 6 percent. And two years later, you will need ₹112, and after three years, the same product will be sold for around ₹119.
To put it simply, inflation gradually eats into your money. And as Warren Buffett said inflation swindles everybody. So, we explore a slew of investments one can make to beat inflation.
These are the investments you can make to beat inflation:
Index funds: To become a part of stock market rally, one of the easiest ways out there for a retail investor is to buy index funds. These funds have allocation of stocks in the same ratio as a broader index such as Nifty 50 or BSE Sensex. So, when the index rises, your portfolio will rise in the same proportion. So, chances are that you will be able to beat inflation.
Debt Investment: There could be occasions when relying only on stocks to beat inflation can become risky.
So, it is advisable that some part of your portfolio should be allocated to bonds. Ideally, this could be in the 60-40 ratio which implies 60 percent of your investments is allocated to equity whereas the remaining 40 percent to debt.
There is no denying the fact that the debt investment offers a fixed rate of interest, it can be a hedge against the risky investments in equity.
Gold: Only a few would dispute the fact that gold manages to beat inflation in the long run. On the top of it, it is a liquid asset and has high degree of trust among Indian families. Some experts argue that gold investment is not fool proof because one loses money in making charges and some cost is incurred in storing physical gold in lockers, etc.
Those who are apprehensive about storing physical gold can explore the option of buying gold ETFs which are traded in the stock exchange and track physical gold. So, with gold ETFs, one can enjoy the perks of gold investment along with flexibility of tradable stocks.
Other saving instruments: One can invest in NPS, and even in PPF, as they post higher returns than the rate of inflation.
National Pension Scheme gave reasonably good one-year returns (on Tier 1) i.e., anywhere between 7.8 percent to 11.8 percent based on the investment manager you chose.
On PPF also, the current rate of interest is 7.1 percent, which is higher than the inflation, although marginally.
Cryptocurrencies: If you are Warren Buffett fan, then you will not be excited by this new asset class as he said he wouldn't buy it even for $25. However, if you are among the likes of Peter Thiel for whom Buffett is a sociopathic grandpa, investing in cryptocurrencies can be a safe and timely investment to not only beat inflation but to render it totally irrelevant.