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Inflation

Inflation, Investing & Charts

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Honest Confession

This month’s blog post has been a struggle. The amount of stuff happening in the investing world, can easily make you go bonkers 🙂

But then are some events in the financial world, which has a significant everyday impact on all of us. One of which is making life difficult for all of us (in varying degree) :

INFLATION

another favourite inflation example :

The developed world (especially US) is facing unprecedented amount of inflation

US inflation since 2000

India on the other hand has seen similarly high levels in the past, in fact even in the last 10 years

‘Investing in the time of inflation’

At current times, no asset seems to be a safe haven. Having said that, the strategy to beat inflation reminds me of this: In times of peace, prepare for war

In the Indian context, in recent times, investing into equities from 2001-2004, 2010-2013 & 2018-mid 2020 delivered higher than average returns. These were all periods of negative/ low positive returns.

Without a doubt, equity is best suited to build a long-term inflation beating portfolio. The below chart is a great example

This in no way means, that equities would beat inflation over every 2–3-year period. There would be periods, wherein we can have high inflation and even negative returns, but over long-term equity does the job.

Rate Hikes and Equity markets :

In the same period, Nifty :

 

Bottom line : The short term might be choppy, but as seen in the past, every correction is a great opportunity

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