Inflation reduces the purchasing power of currency by raising commodity prices or reflecting poor economic performance. As prices rise, expenses grow faster than earnings, threatening your savings.
To ensure financial security, your preparations must outpace inflation. This means protecting savings through inflation-proof instruments like gold and market-linked investments such as ULIPs.
How inflation works
Inflation compares current commodity prices with past prices. As prices rise without corresponding income increases, a gap forms between savings and expenses. To maintain financial goals, savings growth must outpace inflation.
Protecting your savings
To protect savings from inflation, invest in plans offering higher returns than the inflation rate. Market-linked investments like stocks, hybrid funds, and ULIPs are good options as they typically outperform traditional investments.
Unit Linked Insurance Plans (ULIPs)
ULIPs offer exposure to market performance while providing some control, making them attractive for investors seeking growth with managed risk.
Physical assets
Investments in physical assets like precious metals and real estate can also help counter inflation. Precious metals such as gold maintain value during inflationary periods, while real estate offers both financial security and potential income through rentals.
Understanding inflation’s impact is key to building a future-ready financial plan. Careful consideration of inflation rates and asset class returns will ensure your savings grow despite rising costs.
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