Allow A Mutual Fund to Grow Along With Inflation by MMF
World is facing global shutdown which has forced Indian market to fall severely resulting to huge inflation. In this state, investment is perceived as a huge risk. People are afraid to invest in Mutual funds and other kind of policies. But a little knowledge and correct guidance can truly help you to transform this inflation into a gift.
Money Market Funds (MMF) is the best kind of Mutual Fund Scheme when inflation is regularly rising.
Money Market Funds or Money-market mutual funds aim to preserve your capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of place, commercial paper and inter-bank call money. As the funds invest in short-term securities that mature every 30 to 40 days and consequently can pass by higher rates quickly.
Its returns may fluctuate depending upon the interest rates existing in the market. For short period investment and especially during inflation times these are ideal for Corporate and individual investors as a resource to help them keep up their surplus money.
While investing in Money Marketing Funds it is advisable to consult an expert and then invest, or else you can invest on following listed Commodities, Bonds and Funds which have proved to be better option during inflation.
- Commodities: As advisors say, commodities that are more closely tied to industrial market or food production are better options than gold.
- Bonds: Buy bonds which are neither very short nor too long let’s say a bond that matures in two, four, six or eight years is the best to invest on. As once your short term bond matures you can reinvest into some longer bonds at higher rates. This method is known as ‘Bond Ladder’. This way you can truly use the inflation as a helping hand.
- Bank – loan Funds: Buy adjustable-rate bank loans or floating rate funds, most of which are used to finance leveraged corporate buyouts. These funds are structured in such a way that if interest rates rise, they collect more money. The commodity which comes within this category is commodities like Cotton, Silver, Copper, Wheat and such.
- Stock: Invest in small company stocks which are better when price rise suddenly. As values of small stocks tend to be fairly high of small [indebted] companies because inflation reduces their limitations and consequently the rates of their proportion multiply during the time.
A caveat: Before you invest on the above funds remember that they are highly risky, so investing on them can sometime consequence a huge loss. As when inflation eases and rates fall, investors could get burned, as the issuer may call the CDs and investors would lose out on the higher rates at maturity.