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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.)

Electoral Illumination

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As Maharashtra gears up for its Assembly elections on November 20, an unusual harmony looms between the ‘Festival of Democracy’ and the ‘Festival of Lights.’ The rare coinciding of Diwali with the election season underscores a unique opportunity for reflection, choice and renewal. This festive intersection invites voters to participate in the democratic process with the same zeal with which they approach Diwali, a festival that celebrates the triumph of good over evil, wisdom over ignorance, and light over darkness. Much like the ‘diya’ that illuminates each household during Diwali, the ballot each voter casts will shine a light on the direction Maharashtra will take in the years ahead.


The stakes in this Assembly election are substantial, as is the anticipation. Maharashtra’s politicians, both from the ruling Mahayuti and the opposition Maharashtra Vikas Aghadi (MVA) as well as the smaller parties, are vigorously competing to capture the public’s imagination, rolling out grand visions and promises for the state’s progress and development. Against a Diwali backdrop, campaigning has taken on a celebratory tone, a blend of hopeful pageantry and political manoeuvring. Yet, amid the banners, rallies, and slogans, the electoral landscape is also marked by competing challenges: inflation, unemployment, agricultural distress and the ever-present concerns about infrastructure and governance.


As politicians court the public with fervour, every citizen in Maharashtra must remember their indispensable role. Voting is not simply a civic duty; it is a moral imperative. Just as Diwali invites self-reflection on one’s actions and relationships, so too does election season call for introspection about the society one wishes to shape. Apathy, often creeping in on election day, is Maharashtra’s greatest adversary. To forego voting is to abdicate one’s stake in the future. Much as Diwali lights every corner of the home, so must every eligible citizen make their way to the polling booth, illuminating the path forward with collective will.


There is, of course, a cautionary tale embedded in this coincidence. Diwali’s bounty can sometimes blind people to the superficial shine of appearances, and elections are prone to similar illusions. As candidates pledge sweeping reforms and promise a brighter tomorrow, voters must look beyond the gleam of grandstanding and weigh each party’s record against its rhetoric. Maharashtra’s electorate must be clear-eyed about the transformative potential of their vote and not be swept away by the bombast of electoral fireworks.


And so, as Diwali celebrations ring through the state, Maharashtra is offered a rare alignment of festivals. The triumph of the ballot, like the flame of the ‘diya,’ will be a testament to the power of choice, enlightenment, and resilience. In a world often divided and polarized, the simultaneous celebration of Diwali and democracy is a heartening reminder of the values shared by both. May the electorate carry this torch forward, lighting the way toward a brighter, more prosperous future for Maharashtra.

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