Inflation And How To Beat It
“If your money isn’t growing, it is depreciating.”
How Inflation impacts the wealth?
Inflation is the decline of purchasing power of a given currency over time. It refers to a rising price environment of goods & services. Inflation is detrimental to long term investment portfolio return. Therefore, an investor must be cognizant of risk of inflation on investment returns. As Warren Buffett say you may feel richer, but you won’t eat richer in the context of Inflation.
This will especially impact the people who have majority of their money in saving account which usually offers lower interest rate.
For example, if any person have Rs.100 in saving account which fetch 3% return so at the end of the year, he will get Rs.103, while due to inflation of an average of 6%, the goods which was costing Rs.100 will be costing Rs.106 in the next year. Hence at the end of the year, the person will not be able to buy that good due to the deficit of Rs.3.
The Brighter Mind Approach
We, at Brighter Mind, think that inflation as drag on investment returns and believe in mitigating the impact of inflation by delivering better inflation-adjusted return. We believe that inflation is a by-product of the growth in the economy. India, being an emerging country, have very robust economic outlook for the future. And in growing economy, it is normal to have high inflation as the demand rise due to increasing in spending.
The fact about inflation is that it actually reduces the purchasing power of the money. Hence it is important to choose the asset class which can fetch higher inflation adjusted returns. We believe that equity is the only asset class which can fulfil this gap and beat inflation in longer term.
Brighter Mind brings in the capability of identifying and investing in growth companies which possess great potential of inflation-adjusted investment return in the near future.