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Abhibyakti Singh

Executive Assistant, LXME

Investment Options to Beat Inflation Rate in India

We hear complaints of ‘mehngai’ (expensiveness) around us daily. As prices rise, our savings get smaller, our cost of living increases, and we can purchase less with the same amount of money!  We can see its impact in our everyday lives. This is why it is very important for women to keep track of their investments and ensure their portfolio has inflation-beating investments.

So, what is the ‘best investment to beat inflation’? Let’s discuss this in this blog.

What is inflation? What are its effects?

Inflation is the increase in prices of goods and services over time. It impacts our ability to purchase items due to a rise in their prices. For example – A vada pav cost Rs. 5 in 2013, Rs. 10 in 2018 and now, it costs almost Rs. 20 in 2024!

How to beat inflation rate?

As inflation increases, our living costs also increase so it’s important to make sure that we invest in inflation beating investment. This means that the returns on our investments need to be more than the rate of inflation over time.

Assume the inflation rate as of December 2023, on average, was 8%.

(Inflation reported by the government is calculated considering the necessities but considering our lifestyles and our spending patterns, we can assume inflation for us to be 8-10%.)

InstrumentsInterest rate/ rate of Return Real ReturnInflation Beating Investment
Savings Account3% p.a.-1.55% p.a.No
Equity Mutual Fund14%* p.a.6.45% p.a.Yes
*Mutual Funds are subject to market risks, read scheme-related documents carefully

How to invest to get inflation-beating returns?

The best investment to beat inflation are equity-related investment instruments.

What is Equity and how it helps?

Equity is a value creator in your portfolio and historical data shows that the stock market returns have generally beaten inflation rates. When prices rise, businesses generate more profit, and as a result, share prices also rise.

What are the avenues to invest in Equity?

You can invest in equity through several avenues such as through equity mutual funds, direct stocks, exchange-traded funds, ELSS, etc.

Equity mutual funds are a great option for women as they are managed by professional fund managers and do not require investors to do their own research on individual stocks. Additionally, they allow you to invest in multiple stocks and companies at once.

You can start your investment in equity mutual funds on the LXME app with just Rs. 100 using our Rs. 100 Equity Fund!

Should you invest all your money in Equity?

No, diversification is key.  It is critical to diversify your portfolio and allocate your investments against different asset classes such as debt mutual funds, gold, and fixed-income instruments to manage your risks and optimize returns.

How to diversify your portfolio?

Gold-oriented investments

We all know, that Indian women love gold! Gold investments have proven to beat inflation rates as it has been observed that gold prices rise with an increase in inflation rates.

Note – Gold jewellery involves various costs like making charges, storage & insurance costs, GST, etc. There’s a risk of theft too! Hence, It is considered as a luxury, not an investment. If you’re planning to invest, you can explore gold investments in the form of mutual funds, Sovereign Gold Bonds (SGB), etc., rather than physical gold/jewellery.

You can invest in SGB and Gold Mutual Fund through LXME. Invest now with expert-curated LXME’s Rs. 100 Gold Fund!

Debt Mutual Funds

Debt Mutual Funds are funds that invest in different debt-related instruments. This provides stability to your portfolio in the long run and is suitable to invest for your short-term goals too!

Confused? Simplify the process and explore LXME’s Rs. 100 Debt Fund starting with a sum of just Rs. 100!

Fixed-Income instruments:

You can allocate some proportion of your investments in fixed-income instruments like PPF, SSY, FD, RD, or any other post office savings that offer fixed returns as per your financial goals.

Taking a look at your portfolio from time to time is essential. Evaluate your investments and make necessary adjustments to ensure your portfolio is diversified as well as aimed to generate inflation-beating returns.

In conclusion, navigating investment options to beat the inflation rate in India requires a long-term approach.  As inflation reduces the purchasing power of money, some investment avenues, such as equity mutual funds, can offer diversification and professional management as well as generate returns that beat inflation. It is important to regularly review and adjust your investment portfolio in response to changing economic conditions.  

Connect with a LXME Money Buddy for any guidance needed!

FAQ’s

Why do I need investments that beat the inflation rate?

If you invest in options that do not beat the rate of inflation, you will have lesser purchasing power in the future, hence less money for your goals. For example – You invest Rs. 100 in an investment option that gives a 3% return. However, the rate of inflation is 5%. The following year, your investment value will be Rs. 103 but, since your return is less than the inflation rate your returns will be void.

Are inflation-beating investments expensive to invest in?

You can begin investing with LXME’s Rs.100 Equity Fund with just Rs. 100. Equity Mutual Funds aim at generating inflation-beating returns over the long-term period.

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