The role of inflation in your investment strategy

When planning your financial future, there’s one silent threat you can’t ignore: inflation. It steadily erodes the purchasing power of your money over time — meaning ₹1,000 today won’t buy the same things in 10 years.

If you’re investing without accounting for inflation, you might be losing money even when your portfolio is growing.

Let’s break down what inflation is, how it affects your investments, and how to build a strategy that beats it.

What Is Inflation?

Inflation is the rise in prices of goods and services over time, typically expressed as a percentage. For example, if inflation is 6%, something that costs ₹100 today will cost ₹106 a year from now.

While moderate inflation is normal in a growing economy, it becomes dangerous when:

Your savings aren’t growing faster than inflation

You’re relying on fixed-income assets that don’t adjust

Why Inflation Matters to Investors

1. Reduces Real Returns
If your investment grows 7% annually but inflation is 6%, your real return is only 1%.

2. Erodes Fixed Income
Savings accounts, fixed deposits, and bonds often lose value in real terms during high inflation.

3. Alters Spending Power
Your future retirement or big goals (house, education) will cost more than they do today. Your strategy must account for that.