Sunday, June 8, 2008

What Do We Do With Inflation?

In our last post I talked about how oil prices are rising largely because of speculation. We saw how violent the oil prices have been through last week. There are reports which say that if (oil) trader margin requirements are raised by 25%, oil prices would fall as much as $30. The thing about commodity trading is that a few people do make a lot of money, but the common man and woman simply suffers.

Things are not always fair. Now inflation too has been rising across the world and several people are worried about it. The thing about inflation is that if you do nothing with your money and just keep it in your bank account, inflation will slowly erode it.

The best way to beat inflation according to me is to invest in assets which go up with inflation, and not just go up, but go up several times faster than inflation. In fact during such times, a few people make extremely large returns because of the assets they hold. Once again, I know I will sound unfair and even heartless but such challenging times are in fact the best times for investors.

Something which is good for an investor might not be good for someone who is keeping all his or her money in bank savings account. Inflation causes prices to rise and thus holding commodities is one of the best things to do during inflationary times. However buying commodities when inflation has peaked is not a wise thing. Instead holding commodities when they are out of flavor is what is one of the best ways to create wealth. Just look at what has happened to iron ore, copper, cement, steel over the past four years. Anybody who invested in these today would be a happy person. I have easily made over 400-500% in some of my investments which deal with commodities.

Many of you might complain and say that you didn't buy into them four years ago. However this doesn't mean you won't get opportunities in the future. This also doesn't mean that at the moment there aren't assets which are ignored by the masses. Yes, you need to have the patience to wait for a few more years. But what really is the problem of investing and waiting, if the world's richest do the same thing? Markets might go down or might go up. You should not give a damn, because successful investors only care about there own investments and not about where markets are headed. Be like Arjuna and only look at your target and not what everybody else is investing in.

To fight inflation, you need to have a long term strategy because it is something that will always be there- maybe less or maybe more. Sometime ago everybody was going crazy behind real estate companies and real estate IPOs. See what has happened to them now. See what happened to IT in 2000. History teaches us a lot, and if we spend time learning and reading about historical events we will be able to understand investing better.

Some of the most successful investors I know are not great mathematicians, economists or accountants, but regular people who read and learn from history, psychology and simply observe everything around them.

Think about assets which will go up with inflation in the future. Think about how you can benefit from it and you will get several answers.

Happy wealth creation!

Yogesh Chabria


Read what Gautam Ghosh, one of India's leading management consultants, had to say about Invest The Happionaire Way

Have You Seen The Happionaire TV Promo?


Anonymous said...

I know what you mean when you talk about having patience. I bought into SAIL in 2001 and made the mistake of not holding on. I got irritated and sold it fast and regret it now.

Inflation fighting also needs us to have patience.

I loved the TV promo btw!:-)

Anonymous said...

WOW! The Happionaire Way has grown really huge and it is so great to see you on TV, Yogesh.

I loved Gautam's review too and needless to say am a big fan of your work. Looking forward to your next book as soon as possible. I have read ITHW more than 3 times because it really motivates me every time I read it.

Unknown said...

finished reading the wonderful book and waiting for its sequel, could some one let me know if the books shown on tv18 bestsellers site are also available with local book sellers or we have to buy from website itself?

Anonymous said...

Srinivasa you can buy them at any major bookstore like Crossword. I am waiting for the sequel too it too Yogesh.

This is one of the best books which I have read in my entire life. It is great too see someone write something so incredible and still make it so simple.

Keep it up!

Anonymous said...

The Happionaire way is one of the strongest forces in my life and I thank you for sharing a few ideas with me and millions of others like me.

Keep smiling friends and investing wisely to beat inflation.

Anonymous said...

Inflation is rising, but at the same time also more opportunities are their to invest. I finished reading your wonderful book and went through your reports and I as somebody who runs a value fund can guarantee that anybody following what you shared can easily create wealth in the next 5-6 years.

Anonymous said...

Finished reading a superb book and it has really motivated me to think like an investor. I have realized that the way people think on TV is very different from the way real investors like you think. You see opportunities everywhere while others just miss them.

Anonymous said...

Bank FDs will not give any money now and the best thing to do is invest in stocks for the long term. People putting money in debt are just losing out to inflation. That is my way of fighting inflation. Of course this is not for the faint hearted and as Yogesh said you should always be prepared for your stock prices to go down.

Anonymous said...

Agree with you Nagesh. Also I feel the reports shared by Yogesh not only help us discover great companies they are also keys to discovering other companies on our own.