Investments to beat inflation

Inflation erodes your income and investments in a manner that you do not even notice, but it is constantly and silently chipping away the value of your income, savings and investments. To make sure that the value of your savings and investments do not depreciate over time and you continue to maintain the lifestyle that you are accustomed to, it is imperative that you should get the cover of investments that will effectively protect you from the corroding influence of inflation. There are some asset classes that effectively provide protection against inflationary erosion of the value of your savings and investments. Here are three such inflation-beating assets.

Real estate: The prices of residential and commercial real estate in Indian cities and towns have been on the rise for more than 10 years now due to the insatiable demand arising out of the overall growth in population and the migration of people from rural areas to urban and semi-urban areas. Hence, investment in real estate can provide long-term hedge against inflation due to the appreciation in prices of real estate and the returns that one can get in the form of rental income if the property is leased out on rent.

Of course, if the real estate cycle reverses and the property prices decline, then investors may face the prospect of getting negative returns on their investments in real estate. So, one needs to find out the ongoing trend before investing in real estate.

Gold: The yellow metal is yet another effective hedge against inflation as the demand for gold in India is insatiable due to cultural and economic reasons. Indians buy gold jewellery on various occasions such as marriage, birthdays, festivals, etc. and also hoard it as family treasure, so there is no dearth of demand for gold in India due to which gold prices have moved up constantly over the years. Of course, the prices of gold also witness downward trend during certain periods, but over the long term, investment in gold has always appreciated. Hence, investment in gold provides a good hedge against inflation.

Equities: The returns on investments in stocks have outperformed all other asset classes in India and, therefore, investments in stocks of growth-oriented companies provide excellent protection against inflation. Investments made in stocks of financially sound companies have always delivered excellent returns over the long term, hence equities are the best bet to beat inflation.