If you like following investment news, the chances are that you’ve heard the experts discussing the increase in the price of groceries or decrease the value of the fiat currency.
Of course, you need to worry about this since inflation can affect your efforts to save and invest.
Today, I’m here to straighten things out for you.
We will discuss the impact of inflation and how you can escape the risks come along with it.
Let’s get started!
In a layman term, inflation indicates the rise in the cost of living over a period of time and a decrease in the value of the currency.
It affects the entire economy and turns out to take a bite of your investment too.
According to Statista, the annual inflation rate in 2020 in India was recorded at 4.95%. Following this annual inflation rate, if you had bought something at the beginning of FY 2019-20 for INR|1000, the same thing would cost you INR|1049.5 by the end of FY 2019-20.
But, does the income increase as per inflation?
The answer is NO!
For years, inflation has been the prime reason for the aggravated battle between income and expenditure against you.
And to win this battle, you must consider the schemes which can deliver inflation-beating returns.
Inflation Affects Investment
It comes as no surprise that assets with fixed, long-term cash flows will, in general, perform ineffectively when inflation hits, since the buying force of those future cash flows falls over the period of time.
On the other hand, assets and commodities with flexible cash flows are most likely to perform better with rising inflation.
It’s helpful to understand that inflation generally hits due to a general decrease in a fiat currency’s purchasing power.
And suppose the decrease in purchasing power touches a critical inflexion point where an increase in prices for goods and services and a decrease in fiat currency value happens in a very rapid period of time. In that case, it is termed as hyperinflation.
China, Germany, Russia, Hungary, and Argentina are a few prominent examples of hyperinflation throughout history.
How to Benefit from Inflation?
Yes, inflation can have a significant influence on your portfolio over time.
Taking inflation into consideration, your current financial goals might not be enough to meet in 2030. For this, you need to take timely and informed decision to make sure that inflation doesn’t gulp your savings.
Cryptocurrency can serve as a countering force against inflation!
Diversify Your Portfolio with Exposure to Cryptocurrency
Since inflationary monetary economics are into light, a lot of people are already looking to cryptocurrency as a protection against inflation.
Digital currency is theoretically positioned as a hedge against this scenario. It has come upfront deriving its value from both speculative interests as a hedge and its use as a possible essential trade method in this digitally-oriented world economy.
Cryptocurrencies like Bitcoin are built around those equivalent standards.
The 21 million Bitcoin limit implies that there should be fewer Bitcoins versus the interest for them at one point. What does this mean?
It means that the price per unit should increase as the supply decrease in terms of value.
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