InvestorQ : How does one manage his finances today not knowing the future inflation?
Sakshi Malhotra made post

How does one manage his finances today not knowing the future inflation?

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Aswini Chikkodi answered.
4 months ago
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Inflation is something that affects all of us; it erodes the value of your money. In the simplest terms, inflation means that money loses purchasing power over time. You’ve probably noticed that things cost more now than when you were younger — as costs rise, the same amount of money buys less. The only way you can avoid this is by investing intelligently. The foremost rule is not to let your money idle in a savings bank account. Your money must grow faster than that to retain its purchasing power.

Diversifying correctly can also help you in this endeavour. For eg- Even investors with a lower risk tolerance possibly could benefit from at least some stock exposure. This gives you the potential to have a small portion of your investments increase with inflation. But this doesn’t mean you need to invest all of your money in stocks. The proper balance of stock exposure for your risk tolerance is necessary to make sure you can stomach any volatility without jumping ship. Individual investors are likely to increase returns by sticking to a passive investment strategy and staying invested. Those who attempt to cut their losses, end up getting out at exactly the wrong time and thus can find themselves with returns that are much lower than they would have been had they stayed in the market.

Ultimately, it is impossible to know how much inflation will affect the buying power of your savings decades in the future. But it certainly will affect you, so plan for it. If you are unsure whether you’re on the right track, it might be beneficial to find a fiduciary financial advisor who can assist you with investing and retirement planning based on the level of risk that is right for you and your family.
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