Last week when I was talking to a group of CA’s who are pursuing wealth management course, a CA asked me a pertinent question…”How come suddenly Mutual funds/Equities have become so relevant?
I had to give him a detailed reply…which I am sharing with you all today… Friends, we all need to benchmark our investments with inflation, to maintain the purchasing power of money, our investments need to grow more then the inflation.
If we go back just 20 years, We all would agree that the prices of most of the things , be it food, clothing, shelter etc., would rise very slowly…meaning the inflation was quite low…whereas today our household budgets increase on monthly basis infact the impact of petrol price rise can be felt on daily basis…
And 20 years back I have sold best quality corporate Fixed deposits yielding 16-18% p.a. interest whereas fixed deposits today earn 7-8% p.a. So, 20 years back fixed deposit investment could give you real growth whereas today the situation is quite reverse.
If we add aspirational inflation, for eg 20 years back a family of 4 had one phone, today the same family has 4 phones….& this can be seen in all aspects of life in today’s times.
This week’s Fisdom:
History has proven that in for long term investing Real Estate and Equities are the most potent wealth creators. With inflation, real estate has become unaffordable today to most young families, so to beat the current monster of inflation, most of the families today need to invest in equities and Mutual Funds have today emerged a efficient tool of investing. We will discuss the benefits of investing thru mutual funds or why suddenly Mutual Funds are sahi….in our next episode…