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By:

Kaustubh Kale

10 September 2024 at 6:07:15 pm

Silent Money Killer: Loss of Buying Power

In personal finance, we often worry about losing money in the stock market, dislike the volatility associated with equities or mutual funds, or feel anxious about missing out on a hot investment tip. Yet the biggest threat to our wealth is far quieter and far more dangerous: loss of buying power. It is the invisible erosion of your money caused by inflation - a force that operates every single day, without pause, without headlines, and often without being noticed until it is too late....

Silent Money Killer: Loss of Buying Power

In personal finance, we often worry about losing money in the stock market, dislike the volatility associated with equities or mutual funds, or feel anxious about missing out on a hot investment tip. Yet the biggest threat to our wealth is far quieter and far more dangerous: loss of buying power. It is the invisible erosion of your money caused by inflation - a force that operates every single day, without pause, without headlines, and often without being noticed until it is too late.
Inflation does not take away your capital visibly. It does not reduce the number in your bank account. Instead, it reduces what that number can buy. A Rs 100 note today buys far less than what it did ten years ago. This gradual and relentless decline is what truly destroys long-term financial security. The real damage happens when people invest in financial products that earn less than 10 per cent returns, especially over long periods. India’s long-term inflation averages around 6 to 7 per cent. When you add lifestyle inflation - the rising cost of healthcare, education, housing, travel, and personal aspirations - your effective inflation rate is often much higher. So, if you are earning 5 to 8 per cent on your money, you are not growing your wealth. You are moving backward. This is why low-yield products, despite feeling safe, often end up becoming wealth destroyers. Your money appears protected, but its strength - its ability to buy goods, services, experiences, and opportunities - is weakening year after year. Fixed-income products like bank fixed deposits and recurring deposits are essential, but only for short-term goals within the next three years. Beyond that period, the returns simply do not keep pace with inflation. A few products are a financial mess - they are locked in for the long term with poor liquidity and still give less than 8 per cent returns, which creates major problems in your financial goals journey. To genuinely grow wealth, your investments must consistently outperform inflation and achieve more than 10 per cent returns. For long-term financial goals - whether 5, 10, or 20 years away - only a few asset classes have historically achieved this: Direct stocks Equities represent ownership in businesses. As companies grow their revenues and profits, shareholders participate in that growth. Over long horizons, equities remain one of the most reliable inflation-beating asset classes. Equity and hybrid mutual funds These funds offer equity-debt-gold diversification, professional management, and disciplined investment structures that are essential for long-term compounding. Gold Gold has been a time-tested hedge against inflation and periods of economic uncertainty. Ultimately, financial planning is not about protecting your principal. It is about protecting and enhancing your purchasing power. That is what funds your child’s education, your child’s marriage, your retirement lifestyle, and your long-term dreams. Inflation does not announce its arrival. It works silently. The only defense is intelligent asset allocation and a long-term investment mindset. Your money is supposed to work for you. Make sure it continues to do so - not just in numbers, but in real value. (The author is a Chartered Accountant and CFA (USA). Financial Advisor.Views personal. He could be reached on 9833133605.)

Belgrade, Interrupted

As protests swept through the Serbian capital, Belgrade’s warmth became the only route home.

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Our journey through the Balkans was winding to a close, and Serbia’s capital, Belgrade, was our final destination. Of all the cities we visited during two months of travel, Belgrade stood apart. It was vivid, layered and inexplicably welcoming. Its blend of history and modernity was magnetic; its people were unfailingly warm.


But even as we settled into its rhythms, the city was shifting beneath us. In the weeks leading up to our arrival, protests had erupted across Serbia as citizens took to the streets to demand justice, reforms and resignations. We were told not to worry; the demonstrations were mostly peaceful and unlikely to interfere with daily life. That assurance proved overly optimistic.


Our first week in Belgrade was spent deciphering its public transport, not because of the usual cultural hurdles (new language, unfamiliar scripts) but because much of the city centre had been cordoned off. Protesters had pitched tents around the Parliament Square and other government buildings, blocking routes and forcing buses to take endless detours. We missed our walking tour twice, not due to tardiness but because buses simply stopped showing up. Even the locals were confused, hopping off at random stops, trying to guess their way home.


Yet, in a way only Belgrade could make charming, these detours became a form of sightseeing. By the end of week one, we had inadvertently discovered far more streets than a guidebook would ever suggest. And over the next fortnight, the city slowly unfolded itself. We found joy in the small things – the friendly café owners, sunset walks by the Danube and conversations that bridged cultural divides. Our earlier transport woes had transformed us into reluctant but competent public transit veterans.


Then came June 28. Over 140,000 people flooded the streets in what was one of the largest protests in recent Serbian memory. This time, we heeded the warnings and stayed in. The next morning, Belgrade appeared calm again - almost deceptively so.


That evening, eager to enjoy one final night with our Serbian friends before departing for Germany, we arranged to meet in Zemun, a charming suburb with cobbled streets and fairy-tale architecture. What would normally be a 40-minute bus ride turned into a 90-minute odyssey. New road blockades had appeared, protesting arrests from the previous day. After switching between three buses and navigating near-constant detours, we finally arrived. But the city had more chaos in store.


At around 10 pm, reports surfaced that major roads including bridges connecting Zemun to the rest of Belgrade were being closed. The buses had stopped running. The cab-hailing apps returned nothing. For a while, the streets fell into an eerie stillness. Zemun, usually filled with laughter and promenade-strolling families, had emptied out. Police stood stiffly in position. Protesters, blowing whistles and waving flags, marched with resolve.


We were not the only ones stranded. A young man approached us, asking if he could share a cab. Unfortunately, we were headed in opposite directions. He shrugged and prepared for a two-hour walk. We were luckier, if only by virtue of friendship. Our Serbian companions refused to leave us behind. For an hour, the six of us tried every means to secure transport. When nothing materialised, they took us in for the night.


On the walk back to their apartment, we passed through a city that had cleaved into three groups: citizens desperate to return home; demonstrators seeking justice; and police tasked with preventing collapse. Whistles, slogans, and chants echoed through the narrow lanes. We did not understand the words, but we felt their urgency.


By morning, the tents remained, but the crowds had dispersed. Bus service had resumed. We reached our apartment only to find, soon after, that Zemun had been sealed off again. Our friends texted us photos of the streets we had walked now brimming once more with protestors.


As we made our way to the Belgrade bus station the next day, a wave of emotion overtook me. For three weeks, the city had given us not only beauty and hospitality, but a glimpse of its pain and persistence. Its streets had carried our confusion and our awe, our joy and our worry. As we left its city limits, I made a private vow: to return someday not as a passing visitor, but to a place that, somewhere along the way, had become home.


(The writer is a foreign language tutor and an inveterate wanderlust.)

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