Saturday, January 24, 2015

Why equity will give inflation adjusted returns ?

As we always say, simple things are always tough to implement.

When we talk about shares of a particular company ! The first thing which comes to everyone's mind is business that company is doing? Right ? 

Now let us understand, when a company is making a product say for example in rs. 100 and out of that 20 rs is profit they make on one product. If the price rise / if inflation goes up and 

now the same thing is costing them rs. 100, then they will not reduce the profit to zero and sell the product right ? 

the business owner will pass that inflation or price rise to the end consumer and they will not reduce the profit. so when you invest in shares, the inflation always gets adjusted in equity as explained above.