India in Deflation

Today Finally the Indian Economy Slips into Deflation (Inflation Below Zero.) Inflation at the week ended June 6, 2009 came in at – 1.6%.

The annual rate of inflation, calculated on a point-to-point basis, stood at -1.61% (provisional) for the week ended June 6 as compared to 0.13 % (provisional) for the previous week ended 30 May and 11.66% during the corresponding week of the previous year.

So What it means to you? You will see this Information everywhere around you now onwards. You will see this Information on News Channels, News Papers, Internet, Finance Websites, Day-to-Day talking and every where.

But What does it mean to you?

Well, I will teach you what does it mean to you and now what should be your Investment Strategy?

Remember the Golden Rule of Deflation, “During the time of Deflation, It is always Better to be a Lender (Bond Holder) rather than the Borrower (Debtor).”

So I will give you 2 Rules from this Golden Rule -

Rule: 1 Get out of Debt as early as possible anyhow -

Deflation means the time when Money becomes Asset. Usually Because of Inflation, the purchasing power of your Money reduces over the time. But during the time of Deflation your Money appreciates in its value because Goods & Services in the economy get cheaper.

So being a Borrower during the time of Deflation is a Fool’s Idea. Cut down your Credit Cards, Stop Borrowing More Money & Get out of Debt any how.

Rule: 2 Be a Lender (Bond Holder) -

Instead of being a Borrower, Be a Lender. During the time of Deflation, Bonds & Fixed Income Instruments are the Best Investments. Because Negative Inflation means Positive returns on your Investments. So reshuffle your Portfolio and Increase the Asset allocation of Debt in your Portfolio.

So This is a Deflation Time. Act on the above advises.