Skip to main content

Beat the INFLATION

Looking for ways and means to insulate your investment from rising prices? Here are some strategies to stay tight and right


CHECKED your transport, grocery and utilities bills recently? You’d sure be losing sleep over ever-increasing prices. What’s worse, inflation figures look alarming and have already notched new peaks, fuelled by the recent hike in crude oil prices. The spiralling affect of inflation can not only derail your investment approach but also dwindle your returns. Here’s an investment guide on how you can insulate your portfolio against the menace of inflation.


CHANGE STANCE

In the current scenario of rising prices, analysts feel there is a need to review your financial plans and investment portfolio as the expenses and corpus required to achieve financial goals may increase. You need to shuffle your portfolio in such a manner that it can generate better inflation-adjusted returns. Also, you should avoid investments in illiquid assets with fixed returns as these restrict the chances of generating higher returns it’s advisable if you can try to exit from such investments and re-deploy the amount in asset classes that generate better inflation-adjusted returns.


It is, however, important that before re-adjusting your portfolio, you should keep certain factors in mind such as the cost involved for re-adjustment, risk appetite, and current and future financial needs. There are no magic bullets in investing and re-adjusting. It won’t make you rich overnight but what it will do is to significantly reduce your risk without affecting your returns. He advises that you should not re-adjust your investment portfolio in a hurry or just because of certain external reasons which are not in your control. Otherwise, you may end up losing in a big way, he cautions.


HEDGE YOUR BETS

If you feel your current investments are not generating the expected returns, you can start looking for avenues where the risk and returns are different from your existing investments. The investments, however, should not have correlation with the risk factor. Art would be a good bet, you can also invest in private equity and international funds but these are also not risk free. They come with their own share of risks. Some capital protected funds also can be looked at.


Financial Planners hold the view that investing in the right scripts is still the best hedge against inflation. Though they are vulnerable in the short run if the economy weakens, in the long run, they will yield a good inflation-adjusted returns, you can raise investment in gold. Historically, gold has proved to be the perfect hedge against inflation. So if you’re looking to leverage on gold, investing in gold mining and producing companies may also enhance returns. You may further consider other investment options such as commodity funds, arbitrage funds and capital protection bonds with partial equity exposure while re-constructing your portfolio.


TAKE A HOLISTIC APPROACH

Financial Planners believe that while attempting to beat inflation, you should build a sound portfolio of equity, debt and other investment instruments, tailored to suit your financial goals and risk appetite. For this purpose, you can compute the inflation-hedge ratio, which gives a rough indication of how well is your financial position, including how well your portfolio is protected against inflation. For instance, 1.5 inflation-hedge ratio would mean that current portfolio return is 1.5 times of current inflation. This ratio should be improved to keep your portfolio returns much higher than the inflation rate. Accordingly, you can change your investment approach and invest in higher return asset classes, such as equity, for long term and enhance the returns.


Diversification of investment is another important factor that can act as a hedge against inflation. The whole idea is not to put all your eggs in one basket. In other words, if you invest in a wide range of assets such as stocks, gold, real estate, mutual funds, bank fixed deposits and government bonds, where prices behave differently, the overall risk of your portfolio will be lowered.


THE PERFECT PLAN

In the current scenario, when commodity prices are skyrocketing, you should look to increasing inflation-adjusted returns of your portfolio. This, however, shouldn’t be the only reason for changing your asset allocation. It is ideal to ride through the volatility and not panic. But if you want to review your portfolio, it should be aligned with your goals, in a high inflation scenario, asset classes such as equities, commodities, real estate and gold should be preferred over fixed income instruments as they usually generate returns higher than inflation over a period of time.


Times are tough. But if you follow these simple steps, you may well insulate your returns from the rise in inflation.


BEAT THE BLUES

HERE’RE SOME INSTRUMENTS WHICH CAN HELP YOU GUARD AGAINST DWINDLING RETURNS

  • Arbitrage funds

  • Capital protection bonds

  • Gold funds

  • Shares Commodity funds

Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now