We invest to get returns and in such uncertain times to make our ends meet, only one income source for the household shall not suffice. So, people tend to go for some passive income sources such as put their surplus money in some deposits etc. or if have some property to their disposal may even let it out for that extra financial earnings. And now amid high inflation concerns owing to massive liquidity induced world over by global central banks, we think of making inflation beating returns.
This is also because over a period of time the value of money depreciates say considering 8 percent inflation rate, Rs. 100 will be valuing just Rs. 92 after a year. So, one is always on the hunt for options which can earn a return higher than the prevailing inflation rate.
So, here are listed out:
1. Real estate:
In the long term, real estate which should not make over one-third of your total allocation gives inflation-beating returns.
For investment into equity a medium-longer term horizon pays off and the companies need to be selected basis strong fundamentals, future prospects, scope industry-wise. Investors with not much know-how or who fail to select stocks on their own can even go by the SIP option in equity mutual funds. Amid the pandemic blow out, Nifty returns have been a staggering 70%, which is overwhelming for this unusual year. And through the SIP route, the compounding impact will enable on to beat inflation by a good enough margin.
Diversified equity mutual funds may indeed give risk-adjusted higher return. Also, in a scenario when inflation trends higher equity tends to perform well.
3. Dividend paying stocks:
This is another basket of asset that not only helps one have a regular source of income but even lets earn good dividend income over time. Say suppose you hold a share like TCS which generally gives out increasing dividend over time say in a horizon of 10 years then you will surely beat inflation. But here what comes into play is the selection of the good stocks that pay growing dividend over time and you continue to hold it. And for identification of such stocks the easy way out is to check if EPS growth is in line with the dividend per share over a period of time.
Gold considered as a store of value historically is also a hedge against inflation. And in current time, when inflation is viewed as an emanating risk because of the world-over infused liquidity infused by central banks, gold may again hit past levels of Rs. 50000 by this year end. And can again give inflation-beating return this year as well.
5. Global ETFs:
For generating higher return than inflation one can look at global ETFs and focus on economies with lower inflation in contrast to India. And via this route, investors will be able to reap return in a medium time frame.
6. Commodity stocks:
These stocks such as those from metal, agri-commodities or oil sector tend to benefit in times of higher inflation. In such time, the producers get the pricing power and companies in the space can make the best out of it.