Fixed Deposit vs Debt Mutual Funds: Which offers better power of compounding to beat inflation?

With retail inflation again crossing the upper threshold, there is a growing concern among investors. In terms of returns, most investment instruments fall short of keeping up with rising inflation. Although in conventional investment methods like fixed deposits, and recurring deposits, the rate of interest has increased, the question remains whether the rate hikes are sufficient to beat inflation. In an exclusive interaction with Zee Business, Vijai Mantri, Co-Founder and Chief Investment Strategist at JRL Money, talked about how debt instruments can help beat inflation and generate better returns as compared to fixed deposits.

Why is compounding important? 

He stressed on the fact that inflation will continue to rise as the growth is also on an upward trend. In any economy, growth is always coupled with inflation. “Inflation will continue to grow as there is growth. If we look back, such inflation was inflation there, as the pace of growth back then was also not like present times,” added Mantri.

Inflation is compound in nature, so one needs such options in investments as well so that it gets compounded automatically.

“We participate in the growth in the form of spending and expenses. And although there are options available to beat inflation, we explore only the traditional methods of investment,” he added.