How Does One Calculate The Inflation Cost? – Personal Finance

Partner Content

oi-Shubham Kumar

By Staff


The term “inflation” in economics refers to rising prices. The rate of inflation reveals how quickly prices are increasing. To understand it better, have you ever wondered why the price of your Bike now seems so much higher than you remember? The reason behind this is everything you see around you is more expensive than it was when you were a child. The truth is that money’s value fluctuates constantly and occasionally tends in the direction of inflation.

How Does One Calculate The Inflation Cost?

Additionally, when talking about the economy and the value of the rupee, the inflation rate is one of the most crucial subjects to understand. After all, everyone, regardless of class or age, is impacted by money.

Different investments for different life stages

As we grow, we go through various stages of life, and each phase and stage of life brings its own difficulties. Depending on the stage of life you are in at the time, you will save and invest differently.

Investment strategies that you use at various stages of life are referred to as life-stage investing. The beginning of the career-first job, marriage, parenthood, and retirement are the four major stages of your life from the perspective of investment styles. However, there are other important stages in terms of investing that includes buying a house, and planning a child’s education.

A person in their entire life goes through various stages. Planning for financial stability at an early stage of a career is important. This can be done with the help of Mutual funds, however, there are a few important investments that one should do at the right time like health Insurance & life Insurance.

Mutual Funds for different needs

Mutual Funds investment via SIP is one of the best investment strategies to meet financial stability. These offer different investment options for different times and different needs. The mutual fund investment strategy can be divided into three goals, Short term Goals, Medium term Goal and Long term Goals.

Short-term Goals are those that can be achieved within 3 years, Medium term Goals are those that can be achieved in a period of 3 to 5 years and Long term Goals are those that can be achieved in more than 5 years. For every Goal, there is a different category of fund available.

How Does One Calculate The Inflation Cost?

If you are single and or planning to get married or have any goals that can be achieved within 3 years, the best way to plan it would be to invest in Aggressive Hybrid Mutual Funds, which are suitable for Short term Goals. These funds allocate the majority of their corpus to equity and divide it equally between debt and equity. They allocate 75% of their assets to equity and the remaining 25% to investments similar to fixed-income securities.

A person’s lifetime purchase that is among the most expensive is a home. A salaried individual cannot afford to pay for everything out of pocket. The best way to raise money for a home’s down payment may be through Dynamic Asset Allocation Funds (DAAF) at an early stage. These funds invest in a mix of debt and equity, termed hybrids. According to the state of the market, they constantly adjust and rebalance this mix. This fund can be classified as having Medium Term Goals.

How Does One Calculate The Inflation Cost?

The Retirement Stage is a Long Term Goal that every individual plans for starting his or her early stage of life since the beginning of a career. Conservative Hybrid Funds can be the best option to get through the retirement stage. One can start investing in these funds that balance between Equity and Debt. Conservative hybrid funds invest between 75 and 90 per cent of their capital in debt instruments, while the remaining 10 to 25 per cent is invested in domestic equities. To ensure that returns outperform inflation, the stock component can serve as a boost.

Story first published: Friday, December 23, 2022, 12:31 [IST]

Leave a Comment