Diversified portfolio is the best antidote to help you beat inflation

By allocating to equities, debt, and gold, you can earn positive real returns over long term


The State Bank of India pays interests of 5.4 per cent and 6.20 per cent (to non-senior and senior citizens, respectively) on its 5-10 year fixed deposits (FDs). However, the consumer price index (CPI)-based touched 7.34 per cent in September. If CPI remains at this level, households investing in such safe instruments will end up with negative real (inflation-adjusted) returns.

The key reason for the current surge in is high food prices. “There has been a sharp spike in food prices over the past 9-10 months, and that has put pressure on household expenses,” says Sriram Iyer, chief executive officer, digital wealth management, ARWealth, an Anand Rathi company.

How can you deal with this scenario of low interest rates and high inflation? Reduce your expenses and save more. “If your savings are not earning inflation-beating returns, you need to save a lot more to achieve your financial objectives,” says Mrin Agarwal, founder-director, Finsafe India.

High-cost debt has the potential to put you in a deep financial hole. “Rather than earning a paltry return, use your savings to pay off high-cost debt, like credit card and personal loans,” says Pankaj Mathpal, founder and managing director, Optima Money Managers.