Inflation as an investment opportunity

Have you ever taken up economic inflation as an investment opportunity? One has always defined inflation as the sustained increase in the price of goods and services. A gram of gold that once cost Rs.800 may now cost Rs.3000; the inflationary environment can be due to the variety of factors but the end result is a rise in the price of commodities.

While as a trader or an investor it may not be a bad situation, by holding the investments that increase in value and hedging against the inflation. These include real estate, gold, oil, stocks and inflation-indexed bonds.

Inflation can be considered as the right time to invest the locked up liquidity in mutual funds and investing in bonds which gives easy hand to the banks and institutions. The locked up money can be liquidated through exchange-trade by investing in gold bonds, agricultural commodities which are increasing in value during high inflation.

Such money is recycled into the market through surplus funds from the bank, decreasing the borrowing cost. For small-scale business, there will be room for improvement and cost savings. It’s an opportunity to revisit the cost structures of the organization and renegotiating some of the contracts for better pricing. All controllable cost should essentially be controlled eg: travel cost, improvement of consumables such as energy and water especially for manufacturing companies etc. It will also have greater flexibility in adjusting their production levels and accommodate and satisfy temporary fluctuations in demand without causing a sharp increase in prices. The small business unit generates competition among other sectors by keeping inflationary pressure down.

Equity injection in one’s own business can be an option which should not be ignored and should also be considered in conjunction with the borrowing cost to make good of the opportunity in hand especially when the inflation graph is pointing south.

During inflationary environment smart business houses revisit their estimated assumptions while investing their money in equity or debt, reinvesting in their businesses. The revised assumption or changes reflect the worthiness of the investment. You also need to play your cards safe as to how to reinvest the surplus and how to make smart strategies techniques through advisors consultancy during periods of inflation. Investing in sectors from which business can increase earnings relative to economic inflation. Safeguarding the existing investments and to recycle the passive investment is the key to smart business during economic inflation movement.