Inflation…the unseen enemy.

Last week we stopped at inflation. Inflation or price rise is a common occurrence which reduces our purchasing power and forces a change in the consumption pattern itself. When we intend to save and invest whatever interest or returns we get from those savings should at least be equal to the rate of inflation if not more.Any return which is less than the rate of inflation will diminish the value of our savings or invested corpus and making us poorer by day.This we will discuss later. Now coming back to inflation if the term still is unclear to you:

Assume your monthly income is 10000 normally spend 4500 INR for your monthly groceries,vegetables and other sundry provisions.Assuming that the cost of some important food items like edible oil,rice,sugar and vegetables gradually increase and sustains for about a year then at the beginning of next year while your income level would have increased nominally due to the increase in DA payable the price rise could take a much bigger cut away from your salary and thereby reduce or even totally wipe our your disposable income.

Inflation occurs mainly due to:

a.  Increase in demand for any item while supply remains low.

b.additional tax levied on raw materials or inputs.

c.poor crop yield.

d.larger imports

e.fluctuation in value of Indian rupees in relation to other currencies.

f.increase in oil prices

to name a few,.

now we all know that none of these is within our control but it is comforting that by prudently diverting our savings and investments in to channels which can give us decent returns. In the world around you there are many people who are focusing on your income and money for their growth. we have seen not long ago that many non banking finance companies offered interest rates as high as 18% and vanished shortly after collecting huge sums from gullible public.As prudence demands we have to safely travel between these two possible scenarios of inflation eating into low returns,high and attractive returns promised but finally our capital itself vanishing.As a common man/woman with limited or no knowledge about the risk,rewards,rules and safeguards it really appears very difficult.But every challenge offers an opportunity to learn something new. Here is an oppurtunity to learn about the most important asset in our life…OUR MONEY..

Let us do it together,