# Simple steps to beat the Inflation

This article describes about the various simple steps that can be taken to beat inflation in these days where cost of living is increasing day by day by leaps and bounds.

Markets are down and the next day we find that your saving is no worth in to keep up with your losses and the ever increasing goods costs and your hard earned money is no where getting you to face the higher costs of living.

What to do in such a catch-22? Finance and Investments seem lucrative and with proper guideline can help you to sail through the situations.

Things to learn.

1. Savings are the differences which we get in how much we are incoming and how much we are expending.

Although this is a simple Maths, this gives us a very good idea of how much we should expend and how much we should have under the heading of income. If possible, how we should increase our income.

2. Inculcate the habit of saving from the first day.

This although may seem unnecessary for the newbies, and a penny saved today will give us a opportunity to create a lumpsum amount to buy a costlier thing in future.

3. We should also understand the concept of Risk Capital.

In plain words it means that a loaf of Bread costing \$1 today is going to cost \$2 after some days. This means if we go on saving by keeping in mind the costs of today, then it is not going to help. We have to do our calculations for making our saving targets by the cost of tomorrow. One may think of investing in Equities, Gold, Real Estate rather than going on saving in a plain Savings account in a Bank.

4. We should remember that when investing in equities, gold, estates, the risk can be minimized or may become maximized. Investing in logical involutions can reduce the risk, maximize the returns.

5. Close monitoring of the investments reduces the risks involved in investments in the markets.

6. The Rule of 72.

Suppose if you know how much rate of interest your investment will be giving you, then you can calculate in how much span of time your investment will double in value.

For example, if your investment is giving you a rate of interest of 7.2% p.a., then your investment will double in 72/7.2 = 10 years.

This means if you invest Rs. 10 Lakh at 7.2% interest per annum, then it will become Rs. 20 Lakh after 10 years.

Equity markets have shown a rate of interest of 8% to 17% depending on your investment and activity in equity trading.

Mutual Funds are another good idea of investment with the "safe mode" funds having interest rates returns of up to 6% and aggressive funds up to 17% in Indian Markets.

Gold investment and real estate investment have shown good returns if you have good initial investment back up.

Article by Dr Apurva Tamhane
If you have begrudged, forgive.
If you have torn down, repair.
If you have injured, heal.
If you have judged, pardon.
If you have grasped, let go.

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Author: Partha K.09 Jul 2016 Member Level: Platinum   Points : 7

While going through the old articles, I have come across this article. I started reading the article with great interest, but now I am fairly disheartened. Basically the author wanted to say that to beat the inflation, a person is required to invest in equity or in equity mutual funds, but he could not present his arguments succinctly.
The author has not defined inflation, nor has he mentioned the rate of inflation in our country. He could have easily mentioned the CAGR of equity mutual funds of various categories, like large cap, mid-cap, small-cap, diversified and equity oriented mutual funds. These data are easily available in websites like Valueresearch or Morningstar. These data would have helped him to substantiate his argument that equity and equity mutual funds can beat the inflation in the long run. I have discussed extensively about different types of mutual funds and their tax treatment in four of my articles in ISC itself.
Similarly the author has mentioned about Rule of 72, but he has not discussed Rule of 114 and Rule of 144. Interested readers can go through this Forum thread: http://www.indiastudychannel.com/forum/142425-Do-you-know-these-thumb-rules-of-investing.aspx.
Not probing further, I would advise the author to thoroughly recast this article and logically present his argument to substantiate his theory (equity and equity mutual funds can beat the inflation in the long run).

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