ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -It involves continuous investment in securities regardless of fluctuating price levels of the securities. As an investor, consider your financial ability to continue participating in dollar-cost averaging during periods of low-price levels.

Detailed explanation-2: -Rising inflation erodes the purchasing power of a bond’s future (fixed) coupon income, reducing the present value of its future fixed cash flows. Accelerating inflation is even more detrimental to longer-term bonds, given the cumulative impact of lower purchasing power for cash flows received far in the future.

Detailed explanation-3: -The best option for keeping up your personal finances when inflation rises is to keep a percentage of your money in long-term investments as part of a diversified portfolio. Retirement accounts, for example, are commonly used as a way to grow your money slowly over time and keep up with the natural rise of inflation.

Detailed explanation-4: -The best strategy for long-term investment is a diversified portfolio of stocks and bonds as it offers a balance of growth and income potential. This can be achieved through a combination of index funds and actively managed funds, or through individual securities.