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By:

Kaustubh Kale

10 September 2024 at 6:07:15 pm

Akshay Tritiya and Gold

As Akshay Tritiya arrives, gold once again takes centre stage in Indian households. For generations, buying gold on this auspicious day has been considered a symbol of prosperity, purity, and good fortune. It is not just a purchase. It is an emotion, a blessing, and a tradition passed from one generation to another. But beyond tradition, gold also carries an important financial lesson. Gold is not just jewellery. It is an asset. Gold During Uncertain Times Over the years, gold has proved its...

Akshay Tritiya and Gold

As Akshay Tritiya arrives, gold once again takes centre stage in Indian households. For generations, buying gold on this auspicious day has been considered a symbol of prosperity, purity, and good fortune. It is not just a purchase. It is an emotion, a blessing, and a tradition passed from one generation to another. But beyond tradition, gold also carries an important financial lesson. Gold is not just jewellery. It is an asset. Gold During Uncertain Times Over the years, gold has proved its worth not only during festivals, but also during uncertain times. Whenever the world faces wars, inflation, currency weakness, economic slowdown, or financial panic, investors across the globe look at gold as a safe haven. This is because gold has a unique quality. It is trusted across countries, cultures, and generations. It does not depend on the promise of one government, one company, or one currency. Why Gold Holds Value Unlike paper currency, gold cannot be printed endlessly. Unlike businesses, it does not depend on profits or management quality. Unlike real estate, it is globally accepted and easily valued. This is why gold continues to remain one of the oldest and most respected stores of value. It has survived centuries of change, economic cycles, wars, and financial crises. The Right Role in Your Portfolio That said, gold should not be treated as a shortcut to wealth creation. Equities and equity mutual funds still remain essential for long-term growth. Gold plays a different role. It brings balance, stability, and protection to your portfolio. When equity markets are volatile or global uncertainty rises, gold often provides comfort. A sensible allocation of around 10-20% to gold can help reduce overall portfolio risk.  So basically, while stocks and equity mutual funds play the lead role in your long-term financial goals, gold plays the supporting but essential role. Physical Gold Has Limitations However, the way you invest in gold matters. Buying physical gold during festivals may feel emotionally satisfying, but it comes with practical challenges. There are making charges, purity concerns, storage issues, risk of theft, and liquidity problems. A necklace may be beautiful, but you cannot easily sell only a small portion of it when you need money. Also, when gold is bought as jewellery, the investor often forgets to calculate the actual return after making charges and deductions. Smarter Ways to Invest This is where Gold Mutual Funds and Gold ETFs become useful. They allow you to invest in gold without worrying about lockers, purity, theft, or storage. You can invest flexible amounts, start SIPs, track value easily, and redeem conveniently when required. For investors who want gold as part of their financial plan, these options are far more practical than buying jewellery purely as an investment. Tradition with Financial Clarity Akshay Tritiya is a beautiful reminder that wealth should be built with faith, patience, and clarity. Buying gold is auspicious, but buying it in the right form is financially wise. This Akshay Tritiya, celebrate tradition - but also upgrade your financial thinking. Because true prosperity is not just about owning gold. It is about owning it smartly. (The writer is a Chartered Accountant and CFA (USA). Financial Advisor. Views personal. He could be reached on 9833133605.)

Rule of 72, 114 and 70

Updated: Feb 10, 2025

Rule of 72, 114 and 70

In the world of personal finance, understanding the time value of money is crucial. Three simple rules — the Rule of 72, Rule of 114, and Rule of 70 — can help individuals make informed financial decisions and evaluate investment options.


The Rule of 72: Doubling Your Money

The Rule of 72 is a powerful tool for understanding how long it will take to double your money based on a given rate of return. To apply the rule, divide 72 by the annual rate of return. For example, if a bank fixed deposit offers a 7% return, dividing 72 by 7 reveals that it will take approximately 10 years to double your money. On the other hand, equity mutual funds, with an expected 12% return, will double your investment in about six years. The Rule of 72 highlights the importance of time in growing wealth — the higher the return, the faster the doubling of your investment.


The Rule of 114: Tripling Your Money

While the Rule of 72 focuses on doubling your money, the Rule of 114 helps you understand how long it takes to triple your investment. The calculation is similar: divide 114 by the rate of return. For example, with a 7% return from a bank fixed deposit, your money will triple in roughly 16 years. For equity mutual funds, which offer a 12% return, it will take about 9.5 years to achieve the same result. The Rule of 114 provides valuable insights into the long-term effects of your investment choices and helps you set realistic expectations for wealth accumulation.


The Rule of 70: The Impact of Inflation

Inflation can erode the value of your money over time, reducing your purchasing power. The Rule of 70 helps estimate how long it will take for inflation to halve the value of your money. By dividing 70 by the inflation rate, you can assess the long-term impact of inflation on your capital. For instance, with an inflation rate of 7%, your money will lose half its value in about 10 years. If the inflation rate is 10%, it will take just 7 years for your money’s purchasing power to be reduced by 50%. This rule emphasizes the importance of protecting your wealth from inflation’s detrimental effects.


The Takeaway

The Rule of 72, 114, and 70 are essential for understanding the power of compounding and the impact of inflation on your wealth. By leveraging these rules, individuals can make smarter investment decisions and protect their capital from inflation’s effects. Time is money, and these rules offer a simple yet effective way to grasp the long-term impact of financial decisions.


(The author is a Chartered Accountant and CFA (USA). Financial Advisor.

Views personal. He could be reached on 9833133605.)

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