The Gold Standard

 2023-2024 is very interesting period and for a very unusual reason. The reason being a lot of flagship funds of some very famous Asset Management companies completed or crossed 20 Years. Considering the fact that we always tell - Equities should only be considered as a Long Term investment tool, 20+ years truly signifies "Long Term". Before we move on, here is an sample marketing material that is circulated widely to show the growth of the capital invested -


One thing that caught our eyes was - How the material shows today's value in Crores. Largely it is due to aspriations of today's generation wanting to be crorepathis and rightly so. But for a common man, the question is always how much investment has to be made to reach that "Crore" Mark. The materials we presented above talks about 1 lac becoming 2 Crore in 26 years. Given how our mind works, we quickly jump to a conclusion that we just need to invest 1 lac and we will get 2 Crores years later. I am not denying the fact that we will get 2 Crores, if the fund performance continues to be so. But the value of 2 Crore today is very different from what it was worth 25 years ago and what it will be worth 25 years from now. The same is the case with 1 lac investment made 25 year back

The questions that begs to be asked is how to tie up all these numbers that are on different dimensions. Do we need to hire Christopher Nolan to make a movie on this ? No, not needed cos the answer is very simple - Gold. Oh no! not again, you may think but Gold is Gold for a golden reason and it is its ability to protect us from Inflation! Thats all that Gold does, retain the value of Money in long term but Gold does not help us grow our wealth! Getting back to the conundrum that we are facing - 

How to figure how much to invest -  Measure it in terms of Gold. 

Our Favourite Part- 

Investment Needed - The Maths 

                             

So a lac of rupee could buy us 25 Sovereign of Gold in 1995. In today's parlance the equivalent investment we need to make is 14 lacs. So to think that just a lac will make us 2 Crore may not be a smart one because the value of money has become 1/14th of what it was it was 25 years back! Though a lac will make you 2 crores but "Real" worth of 2 Crore in 25 years will only be 1/14th of 2 Crores which is 15 lacs! Simultaneously that chances that one would have invested almost a Year's income in a single fund is very minimal.There is always more than what meets the eye. 

So dont get complacent thinking that a lac of investment is going to help you retire or help your Child's education/marriage, the hard reality is -its not. If you are thinking so - Buckle up. 

More on how seemingly small SIPs have helped investors create wealth with just a decade and few more years of investment. 

Stay tuned!

For any financial Planning queries, Please contact Droplet Wealth at invest@dropletwealth.com.

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