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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.)

Family Fracture

Updated: Nov 7, 2024

Family Fracture

After more than a year of frenetic speculation, the Pawars of Baramati now seem to be visibly and definitively divided. This Diwali, Ajit Pawar, Maharashtra’s Deputy Chief Minister, broke a five-decade tradition by hosting his own Diwali Padwa celebration, a custom long overseen by his uncle, Sharad Pawar, at his Govind Baugh residence in Baramati. The split festivities underscore a deepening fissure within Maharashtra’s most iconic political dynasty, and mark Ajit’s intent to assert an independent influence over the constituency his uncle has cultivated for decades.


While Ajit’s decision to join the ruling Mahayuti coalition with the BJP and CM Eknath Shinde’s Shiv Sena in July 2023 after splitting the NCP founded by his uncle indicated a clear rift, the political class and public alike had remained sceptical about its genuineness. Many believed it was a strategic divergence rather than a lasting break—a ploy by the Machiavellian Pawar senior the high-stakes chess game of Maharashtra politics. Ajit’s frequent meetings with Sharad Pawar at different venues in the months immediately after the rift only fueled these suspicions, suggesting he might eventually return to his uncle’s fold and that it was an elaborate deception plan to checkmate the BJP in Maharashtra led by Devendra Fadnavis.

While these rumours about Ajit being a ‘Trojan Horse’ in the ‘enemy’ Mahayuti camp continue to simmer, Ajit’s decision to host his own Diwali Padwa celebrations ought to send a resounding message that this split is genuine and unlikely to heal soon.


However, since last July, the rift between the two NCP factions has only deepened, culminating in the bitterly contested Baramati Lok Sabha race. Sharad Pawar’s daughter, Supriya Sule, the opposition MVA’s candidate, decisively held her seat against a strong challenge from Ajit’s wife, Sunetra, representing the Mahayuti.


Despite Ajit Pawar and the BJP and Shinde Sena straining every sinew for Sunetra Pawar, she lost heavily to Supriya Sule by over 1.5 lakh votes – a defeat that continues to rankles with Ajit and adding to the ignominy of Lok Sabha defeats from his family. (In 2019, Ajit’s son, Parth Pawar, had crashed in the Maval Lok Sabha contest, becoming the first member in the Pawar clan to lose an election).


Sule’s win demonstrated the formidable support base the senior Pawar faction still commands in Baramati. Now, to supplant Ajit as legislator of Baramati Assembly segment, which he has held for nearly 35 years straight, the canny Sharad Pawar has fielded Ajit’s own nephew, Yugendra, giving a perverse yet ironic twist to the uncle-nephew saga in Maharashtra politics.


In this light, Ajit’s Padwa gathering indicated that the divide within the family is no longer a mere rumour but a palpable, public reality. His decision to hold a separate Padwa celebration now makes the split appear irrevocable while indicating his steely resolve to defend Baramati against his own nephew, Yugendra Pawar.

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