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Top 5 Ways You Can Inflation-Proof Your Portfolio Today!

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So you’re proud of your saving ethic. That’s great news if you have understood the need to build financial assets for the future from your current earnings. But have you inflation-proofed these savings. If you have no idea what I’m talking about, you need to enlist the help of portfolio advisory services in India to build an inflation-proof portfolio. So do read ahead; we’ll start with the very basics.

What is inflation, and why are we experiencing it right now?

According to the Collins Dictionary – the economic definition of inflation is “a progressive increase in the general level of prices brought about by an expansion in demand or the money supply (demand-pull inflation) or by autonomous increases in costs (cost-push inflation)”.

In layman’s terms, inflation is where the same amount of money gets you less and less of the same commodity or services.

There is a global inflationary trend due to overriding factors caused by COVID, the Russia-Ukraine war and others. These have caused production to stall, supply chains to disrupt, shortages, and stockpiling. All of these factors have pushed prices of goods and services to rise globally, creating a high inflationary trend. 

Next, what does inflation do to your savings?

If a loaf of bread costs 35 rupees today, then the same loaf of bread will cost 40 rupees in some time, and the cost progressively rises. It is what inflation does; while it cannot reduce the amount of money in your portfolio, it effectively reduces its purchasing power. So if your monthly expenses are Rupees 25000/- today with inflation, the same standard of living will cost you Rupees 30000/- in some time (depending on the inflation rates).

As you can understand, the savings will not meet your projected expenses.

You can do something to reduce or negate the impact of inflation on your savings. For example, you can build an inflation-proof portfolio and even use stock advisory services to understand how to do it better.

So, what will a financial advisory firm in India do for your portfolio?

A lot is the answer. A good stock advisory firm will create a stock portfolio for you that will not only fight inflation but will take you into the realm of wealth creation from simple savings.

How does this magic happen, you ask? Using the same strategy that market moguls apply, the stock advisory firm in India will incorporate certain inflation-defeating assets that will help you create an inflation-proof portfolio.

Can a stock advisory firm truly assist in wealth creation for you?

Financial advisory services are not attached to any particular asset class and act as pure advisors to their clients in exchange for a fee. As they are not allowed to be agents or get commissions, their advice is client-specific.

Stock advisory firms must have accreditations and qualifications that let them use their knowledge to guide the investors correctly. Portfolio advisory services in India make your saved money work for you and help you make investment decisions that will not only inflation-proof your portfolio but will help in wealth creation.

We have 5 ways financial advisory services in India can help you inflation-proof your portfolio.

  • Diversify Your Portfolio – A diversified portfolio is your best bet against the dynamic and unpredictable market forces. Putting your money in one stock can result in losses and even wipe out your investment. However, ensuring you have a diversified portfolio may help you mitigate the losses accrued in one stock with the returns from other stocks in the portfolio. It is advisable to use portfolio advisory services in India to get the correct mix of diversification while not laying your eggs in too many baskets.
  • Invest in Real Estate through REITs – Real Estate is a sector where prices rise in times of inflation. Correspondingly, the rental rates also increase, which gives the real estate owner rent income adjusted for inflation. Real estate or property is not an easy investment as it is exceedingly expensive and brings additional expenses and complications. However, it is where your financial advisor can steer you towards purchasing units of a reputed REIT (Real Estate Investment Trust). These REITs buy and rent out real estate under their umbrella, offering a good hedge against inflationary trends. Investment in REIT units also gives fluidity to an otherwise non-liquid investment, viz. -real estate. 
  • Invest In Precious Metals – Precious Metals, primarily Gold and Silver, have long been investor favorites as fail-safe investments. Since this investment is linked to a solid asset, it is intrinsically valuable. Precious metals are scarce and have multiple uses in industry and for personal consumption. They have always retained their value even in times of economic crises. Since these assets hold their value even in inflationary markets, they are a great way to maintain your wealth and see that the value of your money does not get eroded. Gold Bonds are also available where one can invest in units and not worry about the safety of storing real gold. These are known as Gold Exchange-traded bonds and Silver exchange-traded bonds (ETF).
  • Invest In Commodities – Several commodities are essential and hence inflation-proof. The demand is non-elastic, so their prices will rise to absorb the inflation hike. These commodities could belong to sectors such as food grains, cement, other infrastructure goods, energy, and more. Commodities trade on commodity exchanges. Seeking advice is a good idea before you invest in them as these are subject to many other factors that can result in price fluctuations.
  • Use Bonds Carefully – You can consider short-period bonds to invest in, as they are safe. However, once they mature, the interest rates will keep rising in case of inflationary circumstances. Therefore, avoid long-term bonds in such a scenario except in the case of flexible rate bonds, where the interest is adjusted in regular short periods.

To sum it up, despite government measures to correct them, inflationary trends will probably be around a while. So instead of panicking, it’s a good idea to plan out your expenses, keeping in mind the correction of the inflation-adjusted value of your savings. A good stock market advisory service in India will help you choose the best stock portfolio that meets your risk and reward profile, help you beat inflation and assist in wealth creation.

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