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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.)

Uddhav’s future uncertain after poll debacle

Updated: Nov 25, 2024

Uddhav Thackeray

Mumbai: The massive setback suffered by Shiv Sena (UBT) in the Assembly polls poses a huge challenge to its chief Uddhav Thackeray who is likely to face a huge task to keep his flock together.


This comes in the backdrop of Eknath Shinde’s Shiv Sena which has performed exceptionally well in the polls.


Right after the results, BJP leader and deputy chief minister Devendra Fadnavis taunted Uddhav Thackeray. “People have given a verdict to Eknath Shinde that he represents the real Shiv Sena and is a true successor of Balasaheb Thackeray (Sena founder and Uddhav’s father),’ said Fadnavis.


Political analysts point that Uddhav has his hands full in the coming months considering that an unfriendly government is in place both at the state and centre.


“Uddhav Thackeray’s Shiv Sena is in deep crises as it has given its worst performance in recent times. Uddhav needs to take corrective steps or else the party will disintegrate further,” warned noted political analyst Hemant Desai. “The party needs to create a new team under Aaditya Thackeray and re-vitalise its outfit,” he added.


This scene is a huge contrast from the Lok Sabha polls conducted a few months back when Uddhav Thackeray led from the front and was instrumental in the MVA being able to win 30 of the 48 seats.


However, in the last few months, the MVA was not able to keep up the tempo and indulged in apathy and infighting among themselves. In contrast the ruling Mahayuti Government pulled up their socks and indulged in course correction offering doles and initiating welfare schemes to the citizens.

Uddhav’s problems are further to be compounded as there is a very likelihood that the incoming government will take proactive efforts to conduct BMC polls.

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