Nobody can deny that the cost of ordinary goods has risen significantly in India in the last year. Inflation has been continuously over the upper band of 6% for the past four months. CPI climbed to a new high of 7.79 percent in April, up from 6.6 percent in March. Food Inflation rose to 8.4% from 7.7% in March followed by Fruits (9.5%), oils and fats (2.5%), spices (2.1%) and cereals (1.1%).
India may have survived the rounds against Covid-19 but a new opponent is in the ring now. Prices are rising, the Indian rupee is weakening, and the stock market is plummeting. During the pandemic, excessive money printing was done to keep the economy from sliding into recession, but as things have begun to normalise, prices have risen across the board.
Crude oil prices which is one of the key driving forces behind Inflation is projected to remain high throughout the year, holding around $94-$99 per barrel, or 33-40% higher if global concerns persist. According to Crisil, every $10 increase in crude oil barrel increases CPI by 0.40 percent.
Rise in LPG & Fuel Prices in India
During the months of March and April, fuel and diesel prices were raised by Rs 10 per litre in just 16 days. In Delhi, Kolkata, and Chennai, domestic LPG currently costs over Rs 1,000. On May 7, LPG prices were increased by an additional Rs 50. Consecutive increases in fuel prices are gradually affecting other aspects of the economy be it transportation costs, higher food prices and day to day commodities.
Price increases have a disproportionate impact on individuals at the bottom of the economic ladder particularly in rural areas, who have limited disposable income. The RBI, which had previously been cautious to hike rates, suddenly reversed course and increased the repo rate by 0.4 percent. Interest rate changes that are made too hastily or too slowly in the face of uncertainty and market volatility can send the entire economy into a recession or cause severe inflation.
Why is the Rupee falling?
To put a little bit context into this, I’m not at all talking about the past 1 or 2 years. Currency depreciation has been an historically proven data happening each year. Have a look at this chart to get an even better perspective on this.
For some who have only recently realised, a better alternative may appear to be simply holding US Dollars or investing in international markets to protect wealth from eroding due to excessive inflation and INR depreciation.
One of the main reasons for this type of devaluation is that the Reserve Bank of India (RBI) has continued to make India appear more competitive in global markets by maintaining a weaker currency, which can boost exports, reduce trade deficits, and lower the cost of interest repayments on sovereign debt.
Personally to me, this is broad daylight stealing from millions of hard working Indians who aren’t aware of these economic policies put in place.
How to save your wealth from being devalued?
In this instance, a well-balanced portfolio should include 10-20% of safe-haven assets such as gold or silver, which have been battle-tested for over 3000 years. Governments and central banks are unable to print more gold out of thin air, which limits their ability to devalue it for their own gain.
They can affect short-term prices to some extent by fabricating gold in the form of sovereign gold bonds, exchange traded funds, and other instruments. But real gold isn’t backing all these instruments. The only way to own real gold is to have it in your hands.
Silver, on the other hand, is currently extremely inexpensive. Take a look at the Silver price chart from the past. Silver is currently inexpensive, and as an industrial metal, its demand grows year after year. Silver is one of my favourite forms of wealth preservation today as said by the author of Rich Dad Poor Dad.
What about the other 80%?
Now let’s break down the remaining portfolio based on multiple asset classes and the risks associated with each of them.
- Let us begin with Mutual Funds. Modern crypto investors may find this tedious, but having roughly 30% of your portfolio handled by professionals for as little as a 0.5 percent to 1% yearly fee is not a terrible idea. These asset management firms employ professionals who conduct their own research and distribute investor funds among a variety of stocks. It is risky because it is an equity investment, but over a 10-year period, it can be a great investment.
- Let us now discuss international stocks. Google, Amazon, Facebook, Zoom, and Uber, for example, are all quite popular in India. We need to diversify abroad because we can’t buy their stocks on Indian stock exchanges. Because the ordinary individual, like myself, is unaware of all of the economic policies and news in the United States, I choose to invest in an ETF that tracks the S&P 500 Index. That manner, one may bet on the greater US market without having to worry about the day-to-day events there. To buffer country risk, a portfolio with around 20% international exposure is ideal.
Now coming at the remaining 30% of our portfolio, we have instruments like bonds, fixed deposits, crypto & a savings account.
Ideally a 10% exposure in bonds issued by NBFCs offering 9-11 percent a year with Crisil A rating is what I’m the most comfortable with. These bonds are secured bonds, which means that in the event of a default, I, as a bondholder, will be given priority over the company’s assets when they are liquidated.
Coming next is Fixed Deposits and Savings account. Having an emergency fund of 6 months is ideal for anyone. Fixed deposits are great to park in the excess cash for emergency fund to mitigate future uncertainties. Savings account are good to keep your liquidity for monthly bills and expenses. Never park your excess money in either of these places because they hardly give 3-5 percent interest a year.
Finally, Crypto, which is a fantastic alternative for someone in their twenties. I’m fine with putting a little percentage of my money in Crypto Assets. Bitcoin and Ethereum make up the majority of my holdings, along with a few other cryptocurrencies that I consider valuable. In my opinion, anyone trying to expand these assets should focus on value investment rather than speculating on new token prices.
Thanks to Ethereum Push Notification Service
You may have already noticed that we don’t serve any ads on our website. That’s because of awesome projects like EPNS which help us sustain the website. If you don’t know about them already, it’s a decentralized Web 3.0-based notification platform. Unlike Android or iOS notifications, EPNS uses a decentralized approach to send alerts about your activities on DEXs and platforms like CoinDesk, MakerDAO, BTC Tracker, and more.
How to get started?
- Firstly, you’ll need to have a wallet like Metamask, WalletConnect, etc.
- You can then download the EPNS application from Play Store or App Store and sign up using the Wallet ID.
- If you’re like me, a Browser Extension must look like your favorite option.
- Go to the available notification channels.
- Click on “Opt-In” & Sign the popup. It’s free and doesn’t take any gas.
- That’s it.
The best part, EPNS is already working on a Wallet to Wallet messaging service. If you haven’t checked them already go now!