The key is not just to save, but to invest wisely — because “Mutual Funds Sahi Hai” — when your money works harder than rising prices.
What is inflation and why does it matter?
Inflation is the general increase in the prices of goods and services over time. This means that the money you have today will buy less in the future. For example, if inflation is 5% per year, something that costs ₹100 today will cost ₹105 next year. If your savings or investments don’t grow at least as fast as inflation, your purchasing power shrinks.
The Double impact of inflation on investments
1. Reduced purchasing power
Inflation directly reduces the real value of your money. Even if your savings grow, if they don’t outpace inflation, you’ll be able to buy less with your money in the future.
2. Erosion of real returns
The “real return” on your investment is what you earn after subtracting inflation. For instance, if your traditional deposit gives you 5% interest but inflation is 6%, your real return is actually negative (-1%). This is why relying solely on traditional, fixed-income products can be risky during high inflation.
How different investments react to inflation
- Fixed-Income Investments (Traditional deposits, Bonds):
These are most vulnerable. Since the returns are fixed, rising inflation eats into both your interest and your principal’s value over time. - Equities (Stocks, Equity Mutual Funds):
Stocks can sometimes outpace inflation, especially if companies can pass on higher costs to consumers. However, excessive inflation can hurt profits and stock prices in the short term. - Real Estate and Commodities (Gold, Oil):
These often act as inflation hedges. Property values and commodity prices typically rise with inflation, helping preserve real returns. - Inflation-Indexed Bonds:
These are designed to keep pace with inflation, as both the principal and interest payments adjust in line with inflation rates.
Why investing beats just saving
Saving is like preserving a seed, but investing is like planting it in a garden. Only when you invest does your money have the chance to grow into a tree that gives fruit and shade for years to come. Simply keeping money “safe” in a locker or low-interest account means inflation will steadily erode its value.
How to Protect Your Investments from Inflation
- Diversify Your Portfolio:
Combine equities, inflation-resistant assets (like real estate and commodities), and international investments to spread risk. - Consider Inflation-Indexed Products:
These adjust returns in line with inflation, preserving your purchasing power. - Review and Adjust Regularly:
Monitor your portfolio and rebalance as needed to stay ahead of inflation. - Invest for Growth:
Focus on assets and funds with the potential to deliver real, inflation-beating returns over the long term.
Take the Sahi Kadam: Invest, don’t just save
Inflation is inevitable, but its impact on your wealth is not. By understanding how inflation works and choosing the right investment mix, you can ensure your money not only keeps up with rising prices but grows beyond them. “Mutual Funds Sahi Hai” when you use them as part of a thoughtful, inflation-aware strategy.
Want to see how inflation can quietly eat into your savings, and why investing is your best defense? Watch Subbu’s video for a simple, relatable explanation and practical tips.
Disclaimer: Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing. Past performance is not indicative of future results.
First Published: May 24, 2025 1:04 PM IST
