With Singapore's consumer price inflation having spiked to 13-year highs of 6.7 per cent as at June and with income increases having lagged behind for a high proportion of savers - about 40 per cent, according to a recent study by DBS Bank based on depositors' data - strategies to limit real income erosion have taken on added importance. But savers must be careful not to take risks that could expose them to even greater losses.

While it may be tempting to try to beat inflation through investments, it is not easy to get yields of 7 per cent or more without taking high levels of risk. Given that today's elevated inflation rate is not the norm but the exception, some financial advisers advocate that people aim to make investments to beat the long-term inflation rate, which is around 2 per cent, rather than the current rate. For seasoned investors, advisers recommend other options, including energy stocks, commodities and real estate investment trusts, which tend to perform relatively well during inflationary times. Some also suggest diversifying into alternative assets such as private equity, property and gold. However, all of these are vulnerable to downside risks in today's volatile investment environment. Even gold - a traditional hedge - has not kept pace with inflation.