Ever-rising inflation rate is one of the topmost concerns of the consumer today. Financial planning loses its purpose if inflation is not considered in it. Therefore, investment today does not only revolve around increasing the base amount, but to increase it at the rate at which it can overcome the inflation.

This is the most important element taken into account by those who do not invest their funds in government securities and debt instruments. The rate of inflation is mostly same with the rate of interest offered by the banks for the fixed deposit. Keeping your funds in fixed deposits also helps significantly because it at least does not devalue the fund amount instead increase it each year as per the rate of inflation, which is equitable to hedging against inflation. However, you are not able to earn returns on them. Comparing investment plans with fixed deposit schemes can help you to differentiate between them and you will be in a position to pick the best for you.

Let us see what you can do to hedge your invested funds against inflation as well as earn a decent amount of return on it.

• Insurance plans: Insurance plans are known as the most efficient ways to invest your savings in a secured way and you are able to get long term protection for your loved ones. You will find numerous kinds of insurance plans in the financial market. But if we broadly categorize them, there are two kinds of insurance plans that is, traditional endowment plans and unit linked insurance plans, in short ulips.
  1. Traditional endowment plans are procured basically to get shield against the potential unfortunate financial crisis. The policyholder is also able to get a pre-fixed amount called as the sum insured after a definite period or at the stage defined in the policy documents. The basic objective of these kinds of plan is to get the protection, therefore the rate of return is not given much importance. Still, it enables a person to earn a decent amount of bonus and accumulated interest on his funds.
  2. Unit linked insurance plans, on the other hand, do belong to the insurance plan, but the motive of investing funds in these kinds of plan is different. Many people do not give preference to plan insurance plans, but to those plans which can provide them a good return on their investments. Ulips are linked to equity funds and therefore these kinds are plan are categorized under risky investments. This is the reason why buying ulips should be considered only by keeping the longer horizon in view. Prices of ulips can fluctuate the way equity market fluctuates, however it has the potential to grow your funds by many folds if invested with due care. It is always advantageous to buy ulips as it allows you to save tax on your invested funds up to a certain limit.

   
• Systematic Investment Plans (SIP): Systematic investment plans are kind of plans that allow you to allocate the funds to be invested systematically, in a disciplined manner in various kinds of instruments. You can invest some of your amount in ulips and even in other kinds of debt and mutual funds. Investing in SIP brings up a regulated approach for you in which you invest a fixed amount of funds as per the schedule planned before.

Systematic investment is more like a method than a product. There are a wide variety of investment and insurance plans in the market. You can create a product by choosing the instruments that best suit your budget and future financial plans. This way you will be able to develop your own procedure of acquiring wealth. You can also consider money back plans which let you get the invested amount back in certain portions at regular intervals and you are able to earn good returns at the same time.