The rise in inflation may affect the investment pattern of the investors. Though the impact may be short-term, investors should hold the long-term investment.
According to the record, inflation has moved up to 5.03 percent in February 2021. A rise in inflation refers to the decline in the purchasing power of rupees. It results in the devaluation of the currency.
Consumers have to buy the same amount of goods for a higher value of money. The year 2020 has shown a rise in retail prices however in the last few months the inflation rate and prices went down. Recently again the talks of the rise in the inflation rate are in occurring the market.
The important factors can be activities in the global market and changes in the Indian economy. The rise in the inflation rate affects the spending of people as the insubstantial expenditure reduces. A high inflation rate causes an upsurge in the prices of goods.
This situation might cause an investor to think upon their investment choices and maintenance of the portfolio. The observation inflation rate of three decades shows that it changes with high frequency. The current rate is about 3.75%.
The variation in the investment portfolios should depend on the prospective return or reward you may get in the future. Slight variation in inflation rate in the short-run should not regulate the investment decision of the investor.
Depending upon the short-term or long-term goals the investor should create the portfolio. Investment in real estate would help to earn more wealth as the price grows constantly over years. Therefore people should look at all aspects affecting various kinds of an asset before investing.