There have been instances where the economy has faced an inflation phase, wherein the prices of services and goods automatically rise up. Consequently, the purchasing power of money is reduced to a large extent so that, now with the same amount of money you fail to buy the same goods or services as earlier.
Inflation may result due to a variety of factors. For instance, when there is an increase in the costs of raw materials, it automatically causes an increase in the prices of manufactured goods. However, the general rule of economy is that, “Cost of goods is inversely proportional to supply and directly proportional to demand”. The higher the demand for any particular product, the higher is the price of the commodity. Experts believe that a good way to counter price rise due to higher demand, is to ensure adequate supply to the market.
Top 5 Profitable Investments during Inflation
Since inflation like conditions usually result into less purchasing power of money, it is important to ensure that investments made during such times are carefully & intelligently channelized. According to some industry experts, the trick is to make your investments into the highest gaining sectors that have the capacity to withstand crisis situations.
Real Estate – For those choosing to invest in real estate can do so with the help of investment vehicles like, Real Estate Investment Trust (REIT). Being a long-term investment, there are maximum chances for your investment to supersede inflation phase.
Gold – One of the safest bets for SMEs during inflation period is to invest in gold or other such precious metals. The reason being that, gold acts as an asset that you can always use in the face of sudden crisis. Other metals you may invest into include, silver, platinum, etc.
Stocks – If you plan your investments carefully and wisely, then investing in stocks can prove to be highly profitable. A good way to make your selections is to choose manufacturing companies producing such goods that people cannot live without like, pharmaceutical companies. Another profitable option is to invest in mutual funds, which can produce cash-rich balance sheet.
International Markets – An inflation situation in domestic market opens the door for offshore investments. Investing in the currencies, shares or equities of growing companies is a profitable idea. Not only does such investments ensure that your money is absolutely safe but also makes sure that by the time you are ready to receive returns, the inflation phase in your own market is superseded.
Crude Oil – Just like your profitable investments in gold & other precious metals, making investments on crude oil or petroleum by means of investment vehicles like, DBO & OIL, is also considered a safe option during inflation period.
SME JoinUp Blog (2012) 