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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.)

Nepal’s Perennial Chaos: Gen Z and the Folly of Instant Change

If the Nepal crisis is anything to go by, the global Gen Z risks becoming both the symptom and the tool of systemic instability.

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Last week, Nepal witnessed a dramatic escalation of lawlessness, culminating in yet another change of its Prime Minister. The country’s frequent political experimentations, from absolute monarchy until 1990, to a constitutional monarchy until 2008 to multi-party democracy have all failed to yield stability. Once an officially ‘Hindu state,’ Nepal embraced secularism. Its governments have since oscillated between pro-India and pro-China postures, and now there are calls to revive constitutional monarchy.


Yet, despite decades of trial and error, the same problems of corruption, nepotism, unemployment and inflation plague its political class. Nepal has now pinned its hopes on former Chief Justice Sushila Karki to lead it towards a corruption-free future. The recent upheaval holds cautionary lessons, not just for Nepal, but for democratically elected governments across the globe and the impatient Gen Z.


Wake-up Call

The proximate trigger for last week’s unrest was a government-imposed ban on social media. But the scale of backlash, which saw the wholesale burning of government buildings and courts and attacking politicians on the streets, signals far deeper fractures. For governments mired in corruption and cronyism, the message is that the patience of the youth has run out. Political elites peddling nepotism and self-interest now court disaster.


Yet the lessons are not solely for the corrupt. Even governments that govern relatively well are vulnerable. Mass dissatisfaction, natural or artificially stoked, can be a potent weapon in the hands of adversaries. The rapidity and coordination with which lawlessness spread in Nepal mirrored similar episodes in Bangladesh and Myanmar. This is no coincidence. Democracies must not only act with honesty and transparency but be seen to do so, 24/7, in the era of instant information.


Governments that rely on GDP growth rates, international alliances, or high-profile infrastructure projects as proof of success misunderstand their electorate.


Common citizens assess governance through tangible metrics like the affordability of healthcare and education, reliable public transport, employment opportunities, law enforcement and the condition of roads. Ignoring these realities is perilous. Governments that fail to communicate the rationale behind difficult trade-offs while transparently highlighting short-term pains for long-term gains invite their undoing.


Modern battlefields extend beyond land, sea, air and space. They now encompass the human mind itself, waged through information warfare, disinformation campaigns and false narratives. Before a law-abiding, frustrated youth picks up a stone in protest, a war is already raging in their mind – one that is all too often lost to the wrong side.


Democratic governments face a twofold task. First, distinguish between the intellectually manipulative and the genuinely gullible. The former deserves firm legal action while the latter require patient education and engagement. Governments with little to hide must harness transparency as a strategic advantage, explaining the complexities of governance rather than shielding them.


Easy Fixes

The tragedy lies in the illusion of easy fixes. A transparent government does not promise instant solutions. It signals the courage to say that no free lunch exists, that short-term austerity is sometimes necessary for long-term prosperity. Words alone are not enough; actions must speak louder. Nepal has seen 31 prime ministers in the past 35 years with an average tenure of just over a year. Such instability is not a virtue but a sign of systemic failure. Gen Z must understand that regime change is not akin to scrolling through social media posts; it is neither instantaneous nor inherently beneficial.


Democracy’s solution is more democracy which involves more participation, more patience and more pragmatism. Attacking political leaders or burning down public property may offer cathartic release, but it does nothing to advance democracy. Instead, it exacerbates the very problems it claims to address. After all, nation-building is an investment, not some exercise in speculative day-trading. Just as one must adhere to a medical regimen despite side effects, so too must a society commit to sustained reforms rather than capriciously chasing quick fixes. Gen Z needs to appreciate that a country’s economic health requires endurance and strategic continuity, not impulsive overhauls.


Inflation, unemployment, corruption and nepotism will never vanish entirely. These are persistent ‘dissatisfiers’ that are found even in the most wealthy and advanced democracies. What matters is managing expectations and systemic resilience. Gen Z must adopt a balanced, realistic worldview, lest they fall prey to narratives crafted by vested interests aiming to manipulate unrest for their own ends.


For agitation is easy; governance is hard. Gen Z must move beyond symbolic protests and channel their energy into constitutional processes. Globally, there are examples of young movements successfully transitioning from activism to governance. In India, a rising generation is already engaging in electoral politics, providing a template. The most sustainable form of change is becoming the change. Rather than destroying national wealth in moments of fury, Gen Z’s activism should demand time-bound, measurable action plans. Their agitation should focus not on creating anarchy but on enforcing accountability.


The world is growing more complex daily, bedevilled by climate change, economic disruption, ceaseless conflicts and the emergence of a multipolar global order. Democratically elected governments and a restless Gen Z must learn to see each other’s perspectives.


Governments need to deliver more than rhetoric; they must demonstrate honest performance in daily life. Equally, Gen Z must exercise the patience required by true democratic engagement, resisting the siren call of instant revolution. Otherwise, both sides risk burning bridges forever - not just metaphorically, but literally.

(The author works in the information technology sector. Views personal.)

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