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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.)

Nitish Kumar set for historic 10th term as Chief Minister

PM Modi, Amit Shah to attend grand ceremony at Patna’s Gandhi Maidan today

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Patna: In a meticulous display of unanimity, the NDA legislative party on Wednesday endorsed Nitish Kumar to be sworn in as Chief Minister of Bihar for a record tenth time - an unprecedented milestone in Indian politics. He will take the oath at 11:30 a.m. on Thursday before a gallery of national heavyweights, including Prime Minister Narendra Modi, Union Home Minister Amit Shah, and chief ministers from 11 states.


According to sources, Shah is expected to reach Patna on Wednesday evening. Earlier, at the NDA meeting in the Central Hall of the Bihar Assembly, BJP leader Samrat Chaudhary proposed Kumar’s name - an endorsement seconded without murmur. Soon after, Kumar, accompanied by Chaudhary, LJP (Ram Vilas) chief Chirag Paswan and other allies drove to Raj Bhavan to tender his resignation to Governor Arif Mohammed Khan and staked claim to form the next government. With that, the 17th Bihar Assembly was dissolved, clearing the path for the NDA to begin afresh.


Prior to this, Nitish Kumar was unanimously chosen as the leader of the JD(U) legislative party, with all newly elected JD(U) lawmakers giving him their full support. Similarly, in the BJP legislative party meeting, Samrat Chaudhary was unanimously elected leader and Vijay Sinha the deputy leader. This indicates that Chaudhary and Sinha are likely to become Deputy Chief Ministers. Another speculation is that Chaudhary will continue as Deputy Chief Minister and the second Deputy CM post could go to the LJP (Ram Vilas).


For all his political zigzags, Kumar remains unmatched in oath-taking longevity. He has already been sworn in nine times - eclipsing J. Jayalalithaa’s six terms in Tamil Nadu and will extend his record further. November, it seems, is his political talisman: Thursday’s ceremony will be his fifth November oath since 2005.


In sheer tenure, he still trails Pawan Kumar Chamling of Sikkim (24 years and 165 days), Naveen Patnaik of Odisha (24 years and 99 days), and Jyoti Basu of West Bengal (23 years and 137 days). Yet, Kumar’s near two-decade span - 19.2 years - has been achieved in a far more fractious political marketplace.


Intense wrangling

The NDA’s sweeping 202-seat victory in the 243-member Assembly sets the stage for a cabinet reshuffle of considerable breadth. Based on the alliance’s formula, the BJP may claim 15–16 berths, the JD(U) around 14–15, the LJP (Ram Vilas) two or three, and one each for the Hindustani Awam Morcha and Rashtriya Lok Morcha. Between eight and ten newcomers are expected to enter the ministry, with more women likely to feature this time.


The BJP’s list of probables includes Chaudhary, Nitin Naveen, Mangal Pandey and Hari Sahni, while younger aspirants like Rana Randhir, Gayatri Devi, Vijay Khemka and Maithili Thakur have begun making their case.


On the JD(U) side, stalwarts such as Vijay Kumar Chaudhary, Bijendra Prasad Yadav, Shrawan Kumar and Ashok Chaudhary are tipped to return. Fresh faces may include Umesh Kushwaha, Kaladhar Mandal, Rahul Singh, Sudhanshu Shekhar and Panna Lal Singh Patel. Juma Khan, the NDA’s lone Muslim MLA, is also likely to be inducted.


Minor allies, too, will extract their pound of flesh: Santosh Suman of the Hindustani Awam Morcha, and Upendra Kushwaha’s spouse from the Rashtriya Lok Morcha, are poised for slots. Mr Paswan’s LJP may secure three berths, with Raju Tiwari, Sanjay Paswan and Sanjay Singh among the frontrunners.


The real wrangling is over the choicest posts. The JD(U) is pushing hard for the Assembly Speakership and the Home portfolio; the BJP would prefer to keep them. That the LJP now wants a deputy chief ministership further thickens the broth. Negotiations are continuing at the national level, and the veneer of consensus could thin quickly if the distribution of spoils is deemed unequal.


Nitish Kumar resigns as Bihar CM, Guv accepts it

JD(U) supremo Nitish Kumar on Wednesday submitted his resignation as the head of the outgoing NDA government in Bihar to Governor Arif Mohammad Khan, state BJP president Dilip Jaiswal said.


The governor accepted his resignation and asked him to continue as caretaker chief minister until a new government is formed, Jaiswal told reporters. Kumar was accompanied by Union minister Chirag Paswan, RLM chief Upendra Kushwaha and Uttar Pradesh Deputy Chief Minister Keshav Prasad Maurya during his visit to Raj Bhavan.

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