Inflation (Consumer Price Index in Malaysia) is the rate at which the general level of prices for goods and services is rising. The higher the inflation rate the lesser the power. As a result of inflation, the purchasing power of a unit of the currency falls.
For example, if the inflation rate is 3%, a haircut that cost RM10 in a given year will cost RM10.30 on the following year. As goods and services require more money to purchase, the implicit value of that money falls.
Below is the inflation rate for Malaysia since 2010. Do note that for 2017 until 2020, the rate is just a forecast.
Year Inflation Rate (%)
2020* 3.00
2019* 3.00
2018* 2.88
2017* 2.70
2016 2.09
2015 2.10
2014 3.14
2013 2.11
2012 1.66
2011 3.17
2010 1.72
source: Statista Inc.
In order for us not to "lose" any value of our money due to inflation, we need to make sure our money would "increase" in value by making the money to work for us.
If you think by keeping your money in your saving account is okay, think again. I did a check recently and the standard interest rate for a savings account is 0.35%. In another word, keeping your money in a savings account is actually a "losing" account.
If you just want to keep up with the inflation rate, the better choice would be keeping it in an FD (Fixed Deposit). The interest rate for FD is higher at the range of 3.5 - 3.8% but keep in mind about the illiquidity of the money. You can only withdraw it after a certain period of time.
If you are more adventurous, you can look for investment opportunities that would give you more returns for your money.
Some of the investment opportunities that we know are unit trusts, buying shares of blue-chip companies, REITs and P2P lending. We will be exploring these investment opportunities one by one in the coming days.
Do you have other investment opportunities that you would like to share with us?
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