What is inflation?
44 seconds read
Simply put, inflation is the rise in prices over time, relative to the money available. In relatable terms, a certain amount of money buys you much less today, than it did years ago.
Let’s use an example to understand this better. Say you buy a grilled sandwich today for INR 100. The yearly inflation is 10%. Next year, the same sandwich will cost you INR 110. If your income also doesn’t increase at least as per the inflation rate, you’re unable to buy the sandwich or other such products, right?
Inflation also tells investors how much of a return (%) their investments need to make for them to maintain their current/present standard of living. For example, if investment in ‘X’ returned 4% and inflation was 5%, then the real return on investment would be -1% (5%-4%).
Mutual Funds give you investment options which have the potential to give inflation beating returns! You can aim to protect your purchasing power over the long run by investing in the right type of Mutual Funds.