Mutual Fund to NPS Scheme: 4 Investment Options to Beat Inflation in the Long Term

According to tax and investment experts, one can assume the annual average rate of inflation 6 to 7 per cent and choose investment options that can yield more than 7 per cent over the long term.

Listing out investment options that can give more than 7 per cent yield and beat inflation, experts said that equity or a mix of debt and equity should be chosen over other instruments as it gives 7 per cent inflation growth. can easily be defeated.

On why one should choose equities over other investment instruments to beat inflationary growth, Pankaj Mathpal, MD & CEO, Optima Money Mangers said, “A long term investor who has a time horizon of more than 10 years, He should go for equity exposure, be it direct stock or equity mutual funds, But, one should opt for equity as it will give at least 12 to 15 per cent returns in the long run.”

On average inflation while investing for long term, Sebi registered tax and investment expert Jitendra Solanki said, “One can assume average inflation growth closer to 6-7 per cent per annum. However, for education inflation, it should be kept about 10 percent per year”

Here we list the investment options that tax and investment experts recommend:

1]Direct Stock Market: “To beat inflation, high-risk investors can invest directly in the stock market as it will yield a CAGR of 12 to 15 per cent over the long term. However, be well aware of investing in the stock market while opting for direct. Should be informed. Equity market. A well informed stock market investor can expect 12 to 15 percent return on one’s investment for long term. Hence, this option should be opted if the investment goal is long term goals related to education It is related to,” Pankaj Mathpal said.

2]Equity Mutual Funds: “Those who are willing to take risk, but do not have much knowledge about investing in the stock market, are advised to go for equity mutual funds as the fund manager will handle their money on their behalf. In fact, Few fund managers generate alpha returns. Can easily beat major benchmark returns. Hence, the long-term investment target can be achieved here as equity mutual funds give at least 12 per cent returns over the long term,” Jitendra Solanki said.

3]NPS Scheme: Those investors who want to take limited risk and want to beat inflationary growth are advised to go for National Pension System (NPS) scheme. In this scheme an investor will have a mix of equity and debt exposure. where an investor can choose to have an equity exposure of up to 75%.

Advising NPS account holders to have equity-debt exposure ratio of 50:50, Karthik Jhaveri, Director – Investments at Transcend Capital said, “NPS account holders are advised to opt for debt equity exposure in the ratio of 50:50 In that case, long-term equity exposure would yield 12 per cent return and debt would yield 8 per cent EPR return. Hence, the total net return from their NPS investments would be around 10 per cent (6+4), which would easily beat inflation. He said that here in the NPS scheme, any person can claim income tax exemption on the annual investment of up to Rs. 2 lakh even in a single financial year.

4]ULIPs: In the long term, one can expect better returns from ULIPs (Unit Linked Investment Plans) as it allows an investor to opt for 100% equity exposure. Hence, to beat inflation, ULIPs can also be opted for.

Speaking on the return that one can expect from a ULIP scheme over the long term, Pankaj Mathpal said, “Like NPS, ULIP is also a mix of both debt and equity. Here an investor can opt for 100% exposure to equity. But for striking a balance one can choose to have 50 to 60 per cent exposure in equities and the rest in debt and expect double digit returns in the long run.

Disclaimer: The views and recommendations above are those of individual experts or personal finance companies, not Mint.