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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.)

Buried Twice Over

Darfur reels from a landslide even as war, famine and siege push Sudan deeper into one of the world’s worst humanitarian crises in recent decades.

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Sudan’s western region of Darfur, long synonymous with man-made catastrophe, is now reeling from one of nature’s deadliest blows. The first day of this month saw a landslide obliterate the village of Tarasin in the Marrah Mountains, killing more than 1,000 people. Rebel commanders of the Sudan Liberation Movement/Army (SLM/A), who control the area, described the settlement as “completely levelled to the ground” and appealed for international help to recover the dead. The government in Khartoum, itself locked in a desperate civil war, promised to mobilise all possible capabilities. In practice, little aid is likely to reach the mountains, more than 900 km west of the capital.


Darfur is no stranger to tragedy. In the early 2000s it became the scene of genocide, as Omar al-Bashir, Sudan’s Islamist strongman, armed the Janjaweed militias to suppress a rebellion. Villages were torched, women systematically raped and non-Arab groups targeted for extermination. The atrocities earned Bashir an indictment at the International Criminal Court. Two decades on, the actors have changed but the dynamics remain grimly familiar. The Janjaweed’s heirs have re-emerged as the Rapid Support Forces (RSF), a powerful paramilitary that turned its guns on Sudan’s army last year. Since April 2023 their conflict has dragged Sudan into one of the world’s worst humanitarian crises.


The siege of El Fasher, Darfur’s last city under army control, has become emblematic of that suffering. For more than 500 days the RSF has cut off the city, bombarding neighbourhoods and starving civilians into submission. Over 600,000 people have fled, while those left behind now subsist on leaves and animal feed. Forty-one health facilities have been destroyed, rape is used systematically as a weapon, and famine has already been declared in parts of the region.


Against this backdrop, Tarasin’s destruction is more than just another natural disaster. It illustrates how conflict magnifies the cruelty of nature. The Marrah Mountains, a volcanic massif rising more than 3,000 metres, have long been a refuge for civilians. Their cooler climate and higher rainfall offered shelter from the desert plains. Yet those very rains triggered the landslide that buried the village. The war has made rescue efforts all but impossible. Even in peacetime, seasonal rains in Sudan have killed hundreds annually, while floods last year collapsed a dam in Red Sea state.


The war itself is reshaping Sudan’s political geography. After losing Khartoum earlier this year, the RSF has sought to entrench itself in Darfur, where it retains ethnic ties and logistical networks. Capturing El Fasher would give it near-total control of the west and allow a rival government to emerge. The SLM/A, fragmented since its heyday two decades ago, has pledged to side with the army against the RSF. Yet such alliances are opportunistic, reflecting Darfur’s role as a battleground not just between Khartoum’s forces but among a kaleidoscope of local militias.


Since independence in 1956 Sudan has lurched from civil war to famine to dictatorship. In the 1980s drought and conflict devastated Darfur, sowing grievances that later fed rebellion. In 1989 Bashir seized power in a coup, promising order but delivering decades of misrule and economic collapse. When he was ousted in 2019, many hoped Sudan might finally escape its cycle of war. Instead, the uneasy power-sharing between the army and RSF unravelled into open conflict. Once again, civilians are paying the price.


While Ukraine and Gaza dominate headlines, Sudan’s war that has already displaced 11 million people - more than any other current conflict - has been largely forgotten. Appeals for aid are met with donor fatigue. Relief convoys are looted or blocked while safe humanitarian corridors remain elusive. Without pressure from regional powers such as Egypt, Saudi Arabia and the UAE, or from outsiders like America, there is little chance of halting the carnage.


Unless Sudan’s war is checked, Darfur will remain doubly cursed: condemned both by history and by nature itself.


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