The Rise of the Petrol Price

The increase of the price of petrol has been the topic of every radio station. Everyone is discussion on it and a lot has also given their own opinion on how to cope with this issue such as follow:

• Start using public transportation
• Car pool
• Reduce the usage of petrol by not using the car often (it’s not practically applicable to every individual)
• Reduce the driving speed (drive at the speed of 20kmph? maintain the speed of driving and try not to accelerate)
• Cut down on daily expenses 

All the above suggestions are quite decent and I would definitely give them a try if i could. However, by doing so, how long it will last me for? The fluctuation of the price of commodity is not within our control and it is part of the economy cycle. Just like how we could not control the market inflation. With these, only our economy will grow and move our country on step forward to the target of 2020.

Speaking of inflation, our country has an average of 3% inflation (ie. medical expenses inflated 10-15%, daily expenses inflated 6-10% - a rough calculation) over the past 30 years. When there is market inflation, consumers’ purchasing power will drop and below are a few methods people would try to achieve in order to protect themselves against the inflation:

• Seek for higher pay job (difficulty level - high)
• Request for increment (even more difficult)
• Taking up more than 1 job
• Investment (grow your dollar - ?? %)

Bank saving (return: not worth mentioning)

With the extremely low interest rate return, your purchasing power will drop even lower when inflation happens as what you earn from saving in the bank could not cover the inflation rate.

Fixed deposit (return: 3-5%)

While it gives the security with very low risk, it offers very poor protection against inflation.

There is no flexibility on accessing your fund.

Investment in shares/bonds/funds (return: 8-12%)

Once you are on the right track of investment, be assured that you’ll be financially secured in the future. The right investment is one that will be able to protect you against inflation by suiting to the market movement. 

For instant, an investment of 30 years with a 7% return can still be considered if the market inflation for the 30 years is less than 7%. In the case where the rate of inflation is more than 7%, the value of your money will remain status quo since the day of your investment - which mean your monies did not grow at all after 30 years.

There are various type of funds in the market, do choose wisely and understand your own need before investing. Points to be taken while making this decisions are the company’s background and its financial performance. Most importantly, do it for long term when you decide to invest in fund.

If you are looking for high return in short term/ long term period, shares might be your game. But in this game, you have to play smart and definitely experience, knowledge & capital play the major part.

So, are you ready to fight against inflation? 

ps: be prepared before things happen is the best way to protect yourself