There are various types of financial services on the market. Some of these are in line with the nature of millennials who are efficient, efficient, open to new things, and especially enjoy being able to accumulate wealth in order to achieve financial stability in the future.
Before we discuss other financial services products that can outperform inflation, let’s first talk about inflation and inflation indicators.
Definition of inflation
As stated on the Bank of Indonesia website, inflation refers to the normal and continuous rise in prices over a period of time. However, an increase in the price of one or two goods can only be called inflationary if the increase is of a general nature or if the price of another good increases.
The consumer price index (CPI) is commonly used as an indicator to measure the rate of inflation. Decisions about CPI products and services are based on the Cost of Living (SBH) survey conducted by the Central Bureau of Statistics (BPS). There are four different measures of inflation based on international best practice. These are Producer Price Index (PPI), Wholesale Price Index (PHPI), Asset Price Index (IHA), and Domestic Product Deflator (DPDP).
The PPI is an indicator that measures the change in the average price received by domestic producers for the goods they produce. The Wholesale Price Index (WPI) is the price of the transaction between the first major seller and the next major buyer or wholesaler in the first market of a commodity.
The Asset Price Index (HAI) measures the price movement of an asset. Meanwhile, the domestic product deflator (DPDP) shows the magnitude of the change in prices for all new, finished goods and services produced locally.
With inflation and simple definitions of inflation indicators, it’s time to look for products that can reduce inflation.
5 investments in financial services that generate returns that exceed inflation.
Deposits are savings products that can only be deposited and withdrawn at certain times. Deposits are considered the safest investment product. The interest rate on your deposit also depends on the bank where you decide to place your funds. However, the Deposit Insurance Corporation (LPS) sets and guarantees interest rates.
The advantage of deposits is that the interest rate is higher than savings accounts and they can be used as collateral for loans in the same bank or in cash. The downside is that you can be fined if you take it before the stipulated time.
2. Mutual funds
Mutual funds are places where funds are raised from investors. Investment managers invest in different profiles, time frames, and risk levels. Before you enter a mutual fund, you must be clear about your desired investment goals.
Gold is the most preferred investment product with an upward trend in price, it is stable and the value of the investment can be adjusted depending on the weight of the gold. However, if you are looking for a short term investment, gold is not a solution and is difficult to store as it is easy to lose.
4. Foreign currency
If you think of foreign exchange as a means of maintaining monetary value, you are correct. The investment currency can be dollars, euros and pounds sterling. If you’re thinking about investing in fighting inflation, these three currencies might be worth looking into.
The advantage of these foreign exchange investments is flexible capital. You can invest without going to a joint-stock company, and if you need it urgently, you can withdraw money directly from the nearest currency exchange office. However, exchange rates are highly volatile and vulnerable to government policy.
Choose stocks if you want to earn more than interest on deposits and inflation. Depending on your membership number, you may receive benefits from the company. However, the risk is high and not all stocks can pay dividends. You need to learn more about the company.
In fact, each investment product has its pros and cons. You can choose the above financial services products so that the value of your currency does not depreciate in proportion to inflation. However, it is important to understand that you must choose a financial services product that suits your risk profile.