Inflation = Loss of Purchasing Power

As I write this, Indians are witnessing , rise in price of petrol, diesel, food items, etc.

This rise in prices in one word is called inflation, which is mainly caused due to excess money supply, govt. spending which causes the demand for products to rise, and also due to shortage of supply, which may happen due to natural disasters, or circumstances, such as the rise in price of onions we saw recently. 

So, basically, inflation erodes your purchasing power - the same amount of money will buy lesser things.

With time, inflation, will erode your purchasing power, making you poorer every year.

Effects of Inflation on Investments :

Due to increase in rise in prices, investors have to shell out more, and thus, can retain less than before to invest. Eg. if milk was Rs. 35 / litre, and now is 40 / litre, it means spending Rs. 5 extra, this applies for petrol, and other commodities. 

So you basically, have to pay more for the same quantity. Thus, affecting your standard of life quite significantly.

Inflation is here to stay.

The only solution, is to invest your money aggressively, in order to get returns which will beat the inflation.

Such investments will help you to grow your money, and to retain or better still enhance your spending power, which is vital.

However, investments requires savings, a cut back on your spending now, in order to have a much better purchasing power in the future, especially, when your income will stop.

Bottom line :

Inflation is here to stay, only practical way to beat is through well planned investments, which will help you beat inflation and retain your purchasing power, even after 15, 20 or 30 years.