Fighting inflation

People need to spend more on everyday items. As a fixed-income earner myself, I also have to dig deeper in my pocket.

I recall the days when I was studying in Germany. I used a few financial techniques to fight inflation. In general, the first and foremost thing for anyone to do is to maintain strict discipline in managing expenses and income. That is, don't overspend - and invest cleverly to earn a higher rate of return than the rate of inflation.

My first attempt to beat inflation was quite favourable. I opened an account with an Internet brokerage and regularly allocated part of my monthly salary to stock markets around the world. In this method, a securities house would regularly deduct a fixed sum from your savings and put it in stocks, bonds and mutual funds in the markets of your choice.

In my case, I asked them to put my money in seven mutual funds and countries, namely US funds, German and West European funds, East European funds, BRIC (Brazil, Russia, India and China) funds, Asian emerging markets funds, global alternative energy funds and European real estate funds.

The rationale was that diversification is a key factor to achieving better risk-reward performance in the long run. That's why I chose several kinds of funds from various growth regions, including both developed and emerging markets, as well as alternative energy and real estate funds, which should give good protection against inflation.

My advice to salary men like me is to make regular and continued investments in securities markets, which I believe is the most cost-efficient and convenient way to grow your wealth.

You should not wait until you have a lot of money. Start now even with just a small amount. Get rid of that wait-and-see attitude but adopt the steady investment approach so that you can plan and fix your schedule of investment. Don't worry about timing. If you make continued and regular investments that you can afford in the long term, it will prove very worthwhile for you.

Lastly, besides investing in a local market, you should also have exposure in foreign markets as diversification helps smooth your rate of return. And remember that investing in property can help keep your wealth stay abreast of inflation.

I would like to encourage securities and asset management companies to provide this type of service - continued and regular investment. This should become a popular and good business for them. More importantly, this should prove a great benefit to the public as it will support disciplined investment and wealth creation in the country.

Chodechai Suwanaporn is the director of the Fiscal Policy Office's financial system section. Views expressed here are his own.