- Wealth PMS (50L+)
Continuing the series on adjusting things for inflation, readers complained that hey, I wasn’t really playing fair talking about just the Nifty. How about the Public Provident Fund? PPF is where you can put your money and interest is compounded tax-free.
Rates of PPF are taken from Wikipedia, and the returns, adjusted for CPI Inflation, have been less than inflation since 2007. Which means, adjusted for inflation, even the PPF would have given you negative returns. (PPF accrues interest monthly, compounded in April of each year)
Let’s also add Gold, because that was another asset class you could have parked money in. Again, adjusted for Inflation
Here’s what it looks like:
Your purchasing power, for an investment made in the most tax-efficient, most secure investment (PPF) would have gone down about 11.5% since 2007. This is what “negative real interest rates” mean.
The Nifty, in similar terms, would have lost you 43%. (It’s almost flat on an absolute basis).
But the rank outperformer was Gold, with a return of over 48% beyond inflation since 2007. Gold is up 150% in absolute terms. No wonder we call Gold an inflation hedge!