Inflation is necessary. Only when the value of goods and services keeps increasing does it generate the surplus needed to stimulate the economy. When the prices fall down, people are unlikely to make any purchases in the hope that they may fall down further. Accumulation may be preferred and it may hinder consumption. Of course, too much inflation is problematic. But how much is just enough to put the money value in the sweet spot has no clear answer. It depends on the nature of the economy, the money in circulation, the average disposable income levels, capacity of discretionary spending, and the monetary policy. The RBI has set its goal between two to six percent as desirable inflation and uses its monetary policy instruments to keep the inflation within this band.

However, this inflation may eat up your savings when they are stocked as a stagnant pile. The value of your saved money goes down as the inflation goes up, simply because these savings cannot purchase as much as they could. And with each passing day, week, or month, your real savings only reduce. To beat this, you need to use these savings somewhere and somehow that they generate premium at least as much as the rate of inflation.

About two years ago, I started exploring options to generate these returns. The stock market was the obvious first choice. Having studied a little of theory and corporate law in law school, it seemed that I’d get a hang of it. But when it came to putting my money in it, my hands weren’t firm. I’ve heard as many stories of losses and destructions as the ones of success in the stocks. And for every stock that I zeroed in and felt confident about, I became apprehensive with plenty of ‘what-ifs’.

It took me a while. And I finally made a plunge with a small investment in Titan. Past trends suggested that it was a steady stock without any sudden dives or climbs. But, within two days, it did drop for the worse. I then waited for about two weeks for it to come back up and sold it at the price I had bought it for, simply to feel a sense of relief that I am not in the troubled waters anymore. I did get that relief, but it wasn’t long-lived. I had to watch this same stock rise by almost ten percent within the next two months. Only if I had the confidence to hold it for just these two months, I’d have had a good return. But again, what if it had gone down? I’d have thanked myself for selling when I did.

It is then that I realised the flaw in my approach. If my aim is to ensure that my savings generate returns, then I should take an investor’s path. But what I was studying then was to be a speculator. A speculator holds stocks to sell them as soon as he finds a good margin. But an investor treats these stocks as an asset which appreciate over time. I realised that I had neither the courage nor the confidence to be a speculator. For me, that would be a sure-shot of burning up all the savings.

After this, I moved to purchase a diverse range of stocks with the aim to hold them for years to come and liquidate them only when there’s a pressing need for money. With plenty of reading on how stocks work, I realised that most of those who lose money try to speculate. For a speculator, it is heart-wrenching to see a dip in the market. For an investor, however, it is an opportunity.

Not all of my stock choices turned out to be correct. I do see my shares in Indigo, Maruti, and Infosys appreciate. But the reverse has happened with Vodafone Idea, SpiceJet, and, the worst, IndiaBulls Housing. However, I cannot claim credit for the good stocks just as much as I cannot blame myself for the bad ones. That is because I was working on impulse. It was my hope that these stocks would do well, simply because of their past returns and reputation. I neither looked at their PE Ratios nor their Balance Sheets to ascertain their standings.

To cushion myself from the stocks that were pulling down the net returns, I turned to Mutual Funds. These, at the outset, seemed too convenient. When you see the portfolio of any Large Cap Fund, you’ll see the same common stocks from the Sensex and Nifty 50 indices. Clearly, these are not going to yield ground-breaking returns. But, they keep the money safe, and make it sail above the inflation levels, which is what the initial aim was. I generally agree that the Mutual Funds are good for those who may not want to be bothered by how the market works. In fact, they are good for even those who know how the market works, but don’t have the heart to chase it.

Nevertheless, I kept exploring various stock options. TickerTape, MoneyControl, and Zerodha have become my most visited websites of the year. After a thorough research, I even picked up The Intelligent Investor, a 1949 book by Benjamin Graham, which is said to be the best guide of all time for investing. And when the opportunity is right, I look forward to take a plunge at the stocks that I shortlisted. Despite all the analysis of PE Ratios and EBIDTA levels, I hope I have the confidence and the heart to continue to stay in the market even when it crashes. And I also hope that I can hedge on luck when needed. It’s a tough ask, but that’s what it seems to take.