Hallo all Blogger friends,
This is my new venture.I have just commenced this "Investment Advice" and I welcome all enthusiastic bloggers to visit my blog viz.http://www.investmentadvice-dmdevan.blogspot.com/. As a retired Senior Banker I hope I can share my knowledge which I gained over the years with all of you.Today I would like to share with you a brief write-up on inflation.
What is inflation?:In simple terms inflation refers to a situation wherein you find that too much of money chasing too little goods.ie. the production or availability of goods is less whereas availability of money is high.
What is the effect?:Can you come to a conclusion what will be the effect on price of goods?Will the price of a commodity go up or down?The answer is the price will go UP.The commodity now will be costlier than before.That means the purchasing power of money goes down.
For a common man how to combat this?:Yes common man with limited income will find it difficult to make both ends meet due to inflation.
How to maintain surplus income?:If you have some surplus income what will you with that.In case you keep in cash in the days to come it will gradually lose its purchasing power.Today if you can buy commodities like 5 kg rice,2 kg wheat and 2 kilo gram oil with Rs.500/-after a month or two you may be in a position to buy only around 90% of the items mentioned above.That means cash in hand loses its value gradually.
So you don't want to keep your money in cash.You are thinking of making some investments so that you can meet you future commitments like marriage of your daughter,higher studies of your son,purchase of your dream house, meeting your unexpected medical expenses,etc. Out of surplus income,generally people make investments.But again whether these investments are free from inflationary pressure.No.You may save money.Your Rs.1 lakh in a bank A/c may fetch twenty thousand more after two years.But this Rs.120000/- may be in position to buy only 80% of the goods you can buy today.
Which is a good investment during inflation?:Can you suggest a good investment which will act as a hedge against inflation?Can we find answer tomorrow? Ok bye.
This is my new venture.I have just commenced this "Investment Advice" and I welcome all enthusiastic bloggers to visit my blog viz.http://www.investmentadvice-dmdevan.blogspot.com/. As a retired Senior Banker I hope I can share my knowledge which I gained over the years with all of you.Today I would like to share with you a brief write-up on inflation.
What is inflation?:In simple terms inflation refers to a situation wherein you find that too much of money chasing too little goods.ie. the production or availability of goods is less whereas availability of money is high.
What is the effect?:Can you come to a conclusion what will be the effect on price of goods?Will the price of a commodity go up or down?The answer is the price will go UP.The commodity now will be costlier than before.That means the purchasing power of money goes down.
For a common man how to combat this?:Yes common man with limited income will find it difficult to make both ends meet due to inflation.
How to maintain surplus income?:If you have some surplus income what will you with that.In case you keep in cash in the days to come it will gradually lose its purchasing power.Today if you can buy commodities like 5 kg rice,2 kg wheat and 2 kilo gram oil with Rs.500/-after a month or two you may be in a position to buy only around 90% of the items mentioned above.That means cash in hand loses its value gradually.
So you don't want to keep your money in cash.You are thinking of making some investments so that you can meet you future commitments like marriage of your daughter,higher studies of your son,purchase of your dream house, meeting your unexpected medical expenses,etc. Out of surplus income,generally people make investments.But again whether these investments are free from inflationary pressure.No.You may save money.Your Rs.1 lakh in a bank A/c may fetch twenty thousand more after two years.But this Rs.120000/- may be in position to buy only 80% of the goods you can buy today.
Which is a good investment during inflation?:Can you suggest a good investment which will act as a hedge against inflation?Can we find answer tomorrow? Ok bye.
