Think your savings will be able to keep up with rising prices aka inflation? Think again!

Inflation will affect prices of everyday items as well as big-ticket spends. While traditional investment options like savings accounts & fixed deposits may not help you grow wealth at the rate of inflation or faster, equity mutual funds have the potential. Invest systematically and regularly in mutual funds through a Systematic Investment Plan (SIP) and allow your savings to grow with the power of compounding. Start an SIP today!
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More benefits of investing through an SIP:
✔️ Easy & convenient
✔️ Smaller investment amounts
✔️ Options to pause, top-up and more!
Calculate how much you need to invest every month to achieve your financial goals:SIP Calculator ►  

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Inflation is the sustained increase in the general price level of goods and services over time, leading to a decrease in the purchasing power of money. It is one of the biggest concerns for investors in India as it erodes wealth and affects the standard of living. Therefore, it is important to invest in inflation-beating investments to overcome the impact of inflation on your portfolio.

Mutual funds and systematic investment plans (SIP) are considered as one of the most reliable options to fight inflation. These investment options allow investors to diversify their investments across different asset classes such as equity, debt, and gold. Here are some tips to fight inflation with SIP and mutual funds:

1. Invest in Equity Funds

Equity funds have historically delivered higher returns compared to other asset classes in the long-term. As equity markets are known to outperform inflation, investors can consider investing in equity funds through an SIP route to build long-term wealth. However, equity funds are also known to be volatile in the short term, hence investors need to have a long-term investment horizon of at least 5-7 years to ride through market volatility.

2. Invest in Debt Funds

Debt funds invest in fixed-income securities such as bonds which are relatively less volatile than equity markets. Debt funds are known to deliver consistent returns over short to medium-term investment horizon and hence can be an excellent option to fight inflation. However, investors need to select debt funds that offer higher yields than the current inflation rate to maintain the purchasing power of their investments.

3. Invest in Gold Funds

Gold has always been considered as a safe-haven investment during times of economic uncertainty and inflation. Gold prices have a direct correlation with the inflation rate and hence it can be a good option to hedge against inflation. You can consider investing in gold funds or exchange-traded funds (ETFs) which invest in physical gold and have a low expense ratio.

4. Invest in Inflation-Indexed Bonds

Inflation-Indexed bonds (IIBs) are government-issued bonds that offer protection against inflation. These bonds are indexed to the wholesale price index (WPI) or the consumer price index (CPI) and hence the returns will be adjusted for inflation. These bonds have a fixed coupon rate and are ideal for investors who are risk-averse and want to preserve the value of their investments from inflation.

5. Regular Review of Portfolio

It is important to regularly review your portfolio to make sure that it is in line with your investment goals and risk appetite. Rebalancing your portfolio periodically will help you maintain the right asset allocation and reduce the risk of over-exposure to any specific asset class.

Conclusion

Investing in SIP and mutual funds can be an effective strategy to fight inflation while building long-term wealth. Diversifying your investments across different asset classes such as equity, debt, and gold will help you reduce the risk and increase the potential of returns. With the right investment strategy and regular review of your portfolio, you can beat inflation and achieve your financial goals.