Inflation Adjusted Lumpsum Calculator

Don’t Let Inflation Steal Your Dreams: Calculate Real Returns with PaisaForever!

Many Indians are actively saving and putting away their hard-earned money in lump sums in hopes of securing their financial future. Whether for children’s higher education, a lavish wedding, the home of your dreams, or just a comfortable retirement, lump sum investing can go a long way when used responsibly. You are allocating a lump sum amount at once and expect that to grow. However, there could be a silent and often unrecognized financial enemy that is chipping away at the true value of your return – inflation. 

Definitionally, inflation is the rate at which the general level of prices for goods and services are rising, and subsequently, the purchasing power of currency are falling. In other words, what ₹100 can buy you today, in one year it could require ₹105 or ₹110. It is that continuous loss of value of money over time that means while you see nominal returns on your investment statement, the actual purchasing power you will have in the future won’t reflect that. If your investments are not growing at least more than inflation, then you are losing money in real terms.

Here’s where “Paisaforever” Inflation Adjusted Lumpsum Calculator can be a powerful companion in your financial journey. We understand that whilst there may be various nominal returns in India, it is important to realistically plan for fluctuations in our economy from grocery bills rising, to college fees increasing. Our unique tool allows you to navigate beyond nominal returns and truly consider the inflation-adjusted value of your future wealth.

Why is an Inflation Adjusted Calculator Important for You?

If you invested ₹10 Lakh today for 15 years, expecting a 10% compounded annual return, the nominal value looks great. But, putting aside nominal gains, we haven’t mentioned is what is the real value of that ₹10 Lakh. With an average inflation rate of say 6%, what then is the worth of our provisioned savings when you consider future purchasing power and inflation? Our calculator provides you with this number. The calculator will help you to:

• Set realistic goals: What do you really need to save in order to reach your financial requirements & spending for future;
• Evaluate your portfolio performance: Are you beating inflation with regard to your investment strategies? Are you creating wealth?
• Make informed financial decisions: Are you making sufficient funds available in respect of your future required purchasing power settlement or are you using sufficient funds for that too!
• Plan confidently: Rest easy, knowing your maths has taken one of the biggest threats to action, of creating long-term wealth into consideration.

Don’t let inflation diminish your financial aspirations. Visit PaisaForever now and use our ‘Inflation Adjusted Lumpsum Calculator’ for free to take control of your financial future. Plan smarter, invest wiser, and ensure your dreams aren’t just nominal, but real.

Frequently Asked Questions (FAQs)

1. What is inflation in simple terms? 

Inflation is the rate that refers to the increases in the prices of goods and services over time, which result in your money buying less in the future than it does today. If a cup of tea costs ₹10 today and costs ₹11 the next year, there is a 10% inflation rate for tea.

2. What is the direct impact of inflation on my lump sum investment? 

Inflation decreases the value of your money. If you earn 8% on your investment but inflation is 6%, your “real” return is only 2%. That means, in reality, your buying power only increased by 2%, which is much less than the nominal return that is stated on your investment statement.

3. Why is it so important for investors to consider inflation while investing?

For most of its history, India has witnessed moderate to high inflation. So, if you forget the effect of inflation altogether, you very well may underestimate what future goals of your own will actually cost, which could lead to under-funding those needs, in the time you need the funds!

4. What does “real rate of return” mean and why is it important?

The real rate of return is simply the nominal return on your investment minus the rate of inflation. Basically, it allows you to see the true increase in your purchasing power. A positive real return means that your money is increasing in value at a rate that is greater than prices are rising, whereas a negative real return means you are seeing a decrease in your purchasing power.

5. How does PaisaForever’s ‘Inflation Adjusted Lumpsum Investment Calculator’ help me?

Our calculator takes your lump sum investment, expected rate of return, investment time frame and anticipated inflation rate to give you the future value of your money in today’s purchasing power equivalent. Thus you can see the actual wealth creation after adjusting for inflation.

6. Can inflation affect my retirement planning specifically?

100%. Retirement planning is a long term objective and the cost of living will be a lot more expensive decades from now when you’re out of the workforce and hopefully enjoying your golden years. If you ignore inflation and simply see an apparently large corpus saved for retirement, it means you might not have developed enough wealth to meet your desired standard of living.

7. Are there any particular assets or asset classes available that may be able to outperform inflation?

In the past, things like equity oriented assets or investments (e.g., equity mutual funds, direct equities, and/or real estate) have a good chance of returning more than inflation over a long time period of holding the investment. Gold can also be a good hedge against inflation.

8. Is it always better to invest with a lump sum in an inflationary situation rather than using a SIP or systematic investment approach?

Not necessarily. A lump sum investment takes advantage of the current market situation but a SIP provides benefits of rupee cost averaging which can mean being able to buy additional units or shares if and when markets are volatile or with inflation you may be able to buy additional units or share if and when markets are volatile or pricing is low. The best option is very dependent on your financial situation and on how you view the current market.

9. What is the current inflation rate in India and where can I find reliable data?

India’s inflation rate (usually measured by the CPI or Consumer Price Index) varies from month to month. A good and reliable source to find the most recent data is the Reserve Bank of India (RBI) website or the Ministry of Statistics and Programme Implementation (MoSPI) website.

Read : India’s Inflation Rate YoY

10. Should I be concerned about inflation for short-term investments (1-3 years)? 

Inflation impact is not as pronounced for shorter-term investments compared to longer-term investments, but it is still good practice to consider.  For example, if you are saving for a down payment in a couple of years and we have 6% inflation per year, the price of that home in real price will be 12-18% higher when you actually purchase it.

11. How often should I check in on my investments for inflation adjustment? 

Reviewing your long-term financial goals and investment portfolio considering inflation at least annually, and anytime there is a material change in inflation or a material change in your financial situation.  This would help align your planning with real costs in the world.

Disclaimer: This calculator is for informational purposes only. Actual returns may vary. Always consult a financial advisor before investing.