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  • Rahul Guha

Who marred my wealth, 5 realities that burst the notion?



The best way to draw appreciation from the long-term investment is to put funds in safe hands, wait patiently for a few years & withdraw when you are under dire stress. That is the strategy used by many to get maximum appreciation from investment. This is the first notion I will deal with, although prefer calling such practice as savings rather than investment. The worth of wealth is understood the best in the face of trouble when one has no option but to fend for oneself. That’s the time one starts evaluating how much is accumulated, is that enough? I found this topic most relevant for now, as my investments are big solace during my career transition like many others who dared to venture of their own or lost jobs under the adverse spell of the pandemic. Consistently adding and compounding wealth is crucial much before you prepare to venture the risk, be it job change, migration to another country, business initiative or any other life-changing decision.

How many of you have the conception that saving is equal to investing? It is a fact that interest rates in safe fixed investments have reduced substantially over time where most of the savings happen. Three economic evils erode your money, inflation, reduction in interest rate & change in the tax structure. We have the experience, how time devalued rupees, one needs to hunt to buy an item in ten bucks today, someday hundred bucks will follow the suit. Assessing the future level of inflation is extremely difficult. The challenge, therefore, is to achieve investment returns that keep one ahead of inflation. Billionaire investor Warren Buffett put it “Arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislature. The inflation tax has a fantastic ability to deplete consume capital.” Just saving may not be enough to keep pace with inflation.

My research reflects that interest rates with bank and government deposits are presently fetching 5.5% and with time, banks may charge fees to keep your money with them. Even now post-tax return stands at 3% from these savings, the graph below is enough to illustrate how interest rates moved over time.



Introduction of Capital Gains Tax on investments mostly in Mutual funds and Stocks was another blow on your profit, this was not envisaged earlier. The worth of one lac will become thirty thousand in 25 years from now. Traditional savings can never sustain a long haul of unemployment or retirement. Then what should be the option?

This is one subject which is elementary but never taught in schools. Notions on investment make imprints in our mind from our growing years what we observed from our parents, it gets significance as we grow up. We follow the footsteps of other professionals, friends, and colleagues who we trust smarter than us to devise investment strategies. But our ability to look beyond for better options is petrified with scary thoughts of losing money in high-yielding lucrative investments. I have no intent to offer investment advice one may gather enough information from numerous contents available on the net or seek advice from fund managers. My purpose is to alight you on the fact how important it is to latch open your mind from limiting believes and embrace investment practices that get you compounded returns that support your purpose. The common notions that form the limiting belief with the investment are following:



1. Investment except guaranteed interest is risky – We are made to believe that one should invest with guaranteed interest plans to safeguard our capital, which gives us the maximum comfort. Our mind accepts low risk, low gain, or no gain option in such investments as long as capital invested remains intact. The inherent quality of Investment is a risk, calculated risk if one aspires to get a double-digit post-tax return on your capital. One needs to understand the nuances of variable high-yielding investment options and learn to have the patience to maximize gain, full dependency on fund managers not advisable.