Investors fear the word “The inflation” because inflation is one of the important risks for every investment type. Bank of Thailand indicated the reason why the inflation rate has increased since 2018 which is an economic recovery, especially a high demand of consumer goods which is the factor that accelerate the fundamental production such as coal, natural gas and oil.
Moreover, a saving interest which has been low for a long time also help a fast-economic recovery together with core inflation other than food and energy also increase which made the world bank needs to absorb the liquidity which was released before.
Thai economic has passed the recovery phase and changed to an expansion phase, also the inflation which did so. However, the economic has expanded greater than the inflation. Bank of Thailand can create the financial policy at a proper time for the domestic economy such as gradually increase the interest and flexible economic policy to preserve the economic recovery.
Additional detail of the scary effect of inflation is a lower on-hand money value or we need more money to buy goods. The basic solution is to increase the in-pocket money value greater than or at least equal to the inflation rate with an investment.
Besides, the increase of inflation affects the interest rate policy and the return of investment, both in saving type and the asset investment which resulting in the decrease of real interest value.
Assume that you have a million baht. Then, you invest in asset A for a year and you will have 1,020,000 Baht or increase 2% but you can purchase 3.5% lower than usual because of the inflation rate deduct the purchasing power or the return from asset A or you may say that the return lost the inflation rate.
The next question is “How to win the inflation rate?”
According to the theory, whenever the inflation rate increase, investment on gold is the best option. It has value and protect from the inflation. Although gold is easy to buy but many people think that it is difficult to sell and hard to keep.
All above reasons, many people prefer share investment and most people think that there is a fluctuation and high risk during the expansion phase and it is hard to plan the strategic. It is the best to take a precaution before do any investment because you may not prevent the inflation but lose the money.
However, share is another investment option before the incoming inflation, but you need to select a high security and safe index which gives high return from dividend yield. All dividend yield information can be found on the company website (Investor Relations information) which shows current year and previous 5 – 10 years detail or from the SET website which include the previous 5 years information.
Return rate from dividend yield can be calculated from each dividend value compare to stock price. The high rate means high return. So, investor can compare each stock to see whether which one is the best. This will help reduce the fluctuation stock price risk.
In general, the return rate should be higher than inflation rate or saving rate and government bond which is higher than 5% return rate.
Another good qualification apart from high return from high dividend yield stock and higher than inflation rate is high and consistency payout with strong financial status, positive cash flow, and good buy-sell liquidity. This information can be found on the company website (Investor Relations information), SET website or securities analysts research.
The level of dividend yield reflects the company ability to create the benefit and payout each year.
Moreover, you can see the best return payout history to each stakeholder of each company which is called Return on Equity (ROE). ROE shows benefit trend from the current asset. The higher number means the higher benefit, high payout ratio and future positive stock price trend.
Is there any other choice than stock which wins the inflation? The answer is yes, and it is the property. This asset is not based on stock market or industrial fluctuation. Mix investment helps reduce the risk and may get high return.
However, to buy any property whether land or house needs high money investment and take long-time to find the best location and there are many buy-and-sell-documents steps and consistency maintenance. So, the simple way is to invest in REITs or the Infrastructure Fund.
These funds are known as “Income Fund” which means the fund that give a consistency return to investors. Since 2000 – 2017, the property fund and REITs which registered in the SET market payout average ratio is 5.08% per year.
From now on, Thai inflation rate tends to increase each year, but we do not have to be worried because we know how to invest to definitely win the inflation rate.