Also, with food prices going up, the retail inflation for March climbed to 6.95 per cent, a 17-month high.
In times of high inflation, the real rate of return falls and often goes into a negative territory. Unless you are able to generate a high inflation-adjusted return, your wealth doesn't grow in real terms. If your deposits yield 5 per cent, the real return is actually negative when inflation crosses 5 per cent. Currently, inflation for a common man may have already exceeded 7-8 per cent. Therefore, the importance of equities rises in a rising inflation environment.
To a retail investor, saving through equity mutual funds remains one of the best to save for long term goals. Although the returns are not fixed and the stock market is volatile over the short to medium term, they tend to drift upwards over the long term.
As a mutual fund investor, here is how to handle inflationary pressure that your savings will be exposed to and end up reaping the benefits of long-term investing.
It's absolutely impossible for anyone to predict the movement of markets. Period. Stay from predictors at all costs. Factors affecting market movements have increasingly become more complex, interrelated and dependent on global events as well. Further, there are technical factors at play. When technical support levels are broken by market, the next level gets projected as the support. But then, markets move on their own and all these supports can be broken. Investing based on predictions could be financially damaging. Be invested in markets, one never knows when the markets reverse and bounces back. The long-term fortunes of Indian corporate sectors look intact and established companies will continue to show decent margins amidst the current constraints.
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