Want to beat inflation? Here’s how a long term investor can achieve this goal

Inflation kills your wealth silently…We all hear about inflation in news, and see it when we shop for our grocery and essential items online or offline. Rising inflation have become an unavoidable part of our life. Experts believe that you can beat it by investing in equities in the long-term. 

According to Ravi Singh, Vice President & Head of Research at Share India, as inflation still remains a matter of uncertainty, it’s advisable to invest in inflation-hedged assets like commodities and cyclical stocks of FMCG, Power, Energy sectors as they generally gives good returns when prices are higher.

How to modify your investment portfolio considering market impact?

Rohit Beri, Chief Investment Officer, True Beacon, wealth management firm for UHNI and HNI’s said compounding is your best friend, Tax saved is money earned. 

“One should invest only a long-term portion of their savings in volatile asset classes like equity. The emergency fund should be in low volatility liquid assets so one doesn't have to break long term investments for emergency needs. Markets are volatile, don’t panic – withdrawing the capital after step fall is the worst thing to do,” Rohit said.

Remember if something is too good to be true, it probably is. If you are sitting in cash, stay there for a little while longer – long-term bonds are not a good idea at the moment. Equity will beat inflation in the 5 year horizon but bonds won't, he added.

Invest in Mutual Funds

Ravi Singh said Mutual funds are a good option of investment as it’s diversify your portfolio by investing in multiple companies or sectors. 

The best way to minimise the portfolio risk and increase the profitability is through diversification which can only be achieved through mutual fund investment. It offers an individual investor exposure to many stocks at convenience and lower cost, managed by portfolio managers, he added.

Investing in balanced advantage funds (BAFs)

According to Kanika Agarrwal,Co-founder Upside AI in theory, a BAF is supposed to give you equity exposure while limiting your downside in falling markets. Therefore, it sounds like a great instrument. However, it is critical which fund you select to do this. Historically many BAFs have not demonstrated the ability to offer downside protection.

The way to evaluate a BAF is not just checking returns, but also methodology they follow to “time the market” and how much they fall in bad markets., she added.

As per Rohit Beri BAFs can be a great tool to manage market volatility in a tax optimised manner.

What do you mean by equity?

Well, equity is buying good stocks in the stock market, and investing in equity-based mutual funds.