By Ankita Ghosh Biswas
The topic of investment gives rise to a lot more questions and the foremost question which comes is where to invest or where should we invest?
The Savings which we possess or have if we do not invest that then the value of money keeps on decreasing due to inflation.
Inflation or expensiveness is the rate at which prices of all the goods and services keep on increasing bit by bit.
Movie tickets can be taken as an example, during the 1980’s movie tickets were then priced at 20 rupees in recent times the same ticket may cost 300 rupees.
The manner in which the price of the movie tickets is rising, in the same manner, let us see how the prices of certain essential goods are varying.
The above picture is taken from an article published in the Deccan Herald where the prices up to 2018 are provided which we realized as we checked the current prices in the online grocery stores.
The above picture depicts that sugar prices have increased by 125 %, whereas the prices of dal and milk have also increased by 85% and 89%. But here stands our income which does not increase at the same rate. It is very rare that promotion of 125% is received by anyone.
Please do keep in mind that these prices are approximate ones there may be certain fluctuations in the expenses you make. The given data makes us realize the effect of expensiveness or inflation which at times we forget to notice or overlook.
I suppose you had 150 rupees in 2014 so you could have brought the three products i.e Sugar dal and milk then but in recent times this has been a little difficult.
So, this indicates the time value of money like the value of 150 rupees in today’s time has decreased in comparison to 2014.
In the same way, the value of our savings is decreasing day today due to inflation.
Just to say that in recent times our monthly expenses is 50000 rupees but after 10 years the same expenses will increase to 2 lakh rupees due to inflation.
And suppose if you think that the 2 lakh that I have can be managed somehow but the case isn’t that rather the value of 2 lakhs will be decreased to a value of 50000 after 10 years.
Hence, if we aren’t investing or the amount, we are investing isn’t providing us the required rate of return due to inflation then we can just barely meet our expenses only.
So, it is very important that the rate at which the inflation is increasing at the same rate or at a rate higher our investments must increase.
Hence what is to be done for that is as follows:
● If we want to check any investment option then with the rate of return we must also keep in mind the real rate of return.
● Real return = rate of return – inflation rate.
● In general, we look through the rate of return of certain popular investment instruments like: –
Fixed Deposits
Debt Funds/Bonds
Equity/Equity funds
Gold
And now let’s focus on the real rate of return:
● Fixed Deposits and debt funds are generally good investment options but only for the short term and not the long term.
● Investment in the long term should beat inflation.
Do check out my video about Fixed Deposits vs Debt Fund for more information on that. And stay tuned to my channel for more information on equity and equity-based funds.
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