How to create Wealth by beating Inflation?

In my previous post, I have explained what is inflation and how it can affect your standard of living and also I have explained why Fixed deposits are not a way to create wealth. In this post, I will discuss few financial products which will give returns much higher than inflation  so that you can improve your Standard of living in due course of time. Shares, Mutual funds and Real estate are among the few options which can give phenomenal returns if you stay invested for long-term. Honestly, I am not an expert in Realestate, hence I will discuss about Stocks/Shares and Mutual funds in this post. If you stay invested in Shares of good companies for longer periods of time say 5-10 yrs or even more, you can achieve very good returns of ~ 25-30%. You can identify good companies by reading and understanding the Balance sheets and Profit & Loss Statements of Companies for the last 5 consecutive years. And you need to follow Financial news papers such as Economic times, Business Standard etc., to come across good companies for investment purpose. I will write more about Share/Stock selection in subsequent posts as this in itself is a big topic. If you are first time investor in Stock market, I strongly suggest you better invest through mutual funds. Mutual Funds are companies which pool in large sums of money from investors like us and invest this money in Shares of Good Quality companies. Mutual funds have a dedicated professional fund manager who is supported by a huge research team. They study 1000s of companies and select 15-20 good ones for investing investors’ money. In short mutual funds are a way to invest in stock market only but through a fund manager, who manages our money in a professional manner. I reiterate here that everyone has to invest part of their savings in mutual funds to beat inflation and thereby create wealth. I will discuss more about mutual funds and its advantages in my subsequent posts.

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