Inflation can simply be defined as the increase in prices of everyday commodities and the consequent devaluing of the currency. The Pakistani inflation has excessively affected the cost of basic amenities like edible oil, crude oil and vegetables.
In a country that invests primarily in traditional rupee-driven investments like fixed deposits (FDs), public provident fund (PPF) and gold, rising inflation is an acute problem that requires a thought-out financial strategy with the intent of deviation “from the norm”.
Our savings are constantly affected by forces beyond our control. The recent global events — the Russian-Ukraine war and the resurgence of Covid-19 — prove that inflation is an uninvited guest who is here to stay. These international events have not only drastically impacted long-term investments and threatened our savings fund, but have also increased the average cost of living across Pakistan.
How Can the Average Pakistani Investor Beat Inflation?
‘In our time, we could buy a month’s worth of vegetables under 100 rupees’. Our parents and grandparents are eternally confounded by rising prices. The one constant here is that earned money is a depreciating asset in today’s economy, and the biggest lesson to learn lies in investment. It seems that the only way to combat or beat the rising inflationary rates is to invest wisely.
It may help to remember that there is no sure-shot set route to beating inflation but there are multiple strategies that can help lessen the negative impact of rising inflation on your investment portfolio and wealth generation plan.
Budgeting Can Help in Beating Inflation: Manage Your expenses
It is significant to start budgeting and adjusting your spending plans according to the prices of goods and services in the market. There are simple ways to achieve this:
- Track your daily expenses
- Be creative with your daily spending
- Look for cheaper alternatives for appliances and clothes
- Cut back on eating out or cancel the Netflix subscription you rarely use.
- These seemingly insignificant costs that bring instant gratification, once curbed, can help with long-term savings and building a smarter strategy for money control.
If you have the purchasing capacity to stash your money away for a long period of time, long-term investment options may just be exactly what you need. Stocks, bonds and equity funds can potentially offer substantial returns on your initial investment. These are driven by the principle of compounding and can easily add increasing value to your invested sum. However, not every long-term investment can make you a millionaire. With investments that pose higher risks and little guarantee, consulting a professional and assessing your financial goals is a must!
Beating inflation requires looking beyond PPFs and FDs as investment options – you need to invest in stocks, mutual funds, real estate, gold and exchange traded funds (ETFs) to ensure you stay ahead of the crowd.
Gold, historically, has been a beloved investment option for Pakistanis. It is also a good deterrent against inflation. The yellow metal has constantly seen an increase in value during trying times, the price of gold rose during Covid-19 which makes it the perfect investment asset.
Another historically validated investment option in front of Pakistanis is real estate. Real estate often acts as a hedge against inflation and allows property owners and landlords to increase the value of their tangible assets as well as rents respectively.
Mutual Funds and ETFs
Nurture Your Income is an app that allows you to invest small amounts of money through mutual funds without any cost and provides returns on your losses. Mutual funds and ETFs offer returns greater than the prevailing rate of inflation. However, they can be volatile in nature and offer greater risks. Mutual funds and ETFs are viable options of investing available to new investors and allow you to invest in lump sums or through an SIP.
Inflation’s impact on the economy is never uniform but it is recurring. Inflation is not likely to go away and relying on traditional forms of savings and investments won’t be sustainable in the long term, especially with the ever-growing demands and needs of our families and children. So sign up at our website today to make your hard earned money inflation-proof!
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