As inflation has been on the rise, what should be my investment strategy?
- Jitendra Yadav
I agree with your concern that inflation has been on the rise. The interest rates have been on a low for a while now, and the outlook for a rise in salary is also not that bright at the moment. And that's where mutual funds come into the picture.
You need to invest in equity, but it is risky. If you invest in equity and the market has been on the rise, you start gaining confidence. But when the market suddenly corrects, you might not be prepared for it, and you ought to redeem your investments in anticipation of a further fall. Thus, the best way to invest in the equity market is to gradually invest small amounts in equity funds, which will help your investments grow much more than the inflation. If your money grows at a rate equal to or lower than that of inflation, you might get a perception that your money has been increasing. However, in reality, the value of money would be on a decline.
To combat such a situation, you need to look at equity funds for investment. If you have the time and knowledge, you can look at direct stocks for investments. Most of the investors who have started investing in direct stocks over the past two to three years have been lucky, as even if they had invested without much knowledge, they would have made money. But don't fall into this trap. When people get too comfortable about the equity market and start trusting it, it is often followed by a correction. This has happened in the past and will most likely happen in the future as well. That's the nature of the market. The best way to safeguard yourself from this is to learn about the market, why this phenomenon occurs, and the best ways to save yourself from this extreme volatility. One needs to prepare themselves mentally to deal with the market volatility. Hence, invest in a mutual fund through an SIP, and when the market corrects, you will be at peace.