In the current narrative, we’re being told a half-truth about the rising prices of petrol, diesel, vegetables, and fruits. The reality, however, is that the value of our currency is plummeting. A glaring example: today, a mere 100 rupees buy a liter of petrol, a stark contrast to earlier times. Back at independence, the Indian Rupee stood at parity with the US Dollar; now it’s 73-74 rupees for a dollar. This depreciation means inflation is inevitable, and it won’t be curbed until our currency gains strength.
In our savings accounts, we earn interest, a seemingly good deal. Yet, that interest always lags behind inflation. As inflation soars, the value of our money dwindles. The solution lies in investing, not saving. Currency should flow into assets like gold, silver, or stocks, which multiply over time. But what’s the magical formula to amass wealth?
The path to riches isn’t always a sprint, sometimes it’s a steady marathon. Enter the ‘get rich slow’ philosophy, which complements the fast track to wealth. It hinges on a crucial understanding: investments trump saving. By adopting this approach, we embrace a long-term vision for financial prosperity.
Picture this: you invest wisely, and your assets grow, securing your financial future. This principle, embraced by millionaires and billionaires, is the cornerstone of steady wealth accumulation. In this blog, we delve into the ‘get rich slow’ methodology, a powerful concept with transformative potential.
Before we dive into the magical formula, let’s acquaint ourselves with the Rule of 72, a fundamental principle in the realm of wealth creation. This rule serves as a compass to determine how long it takes for your money to double based on the interest rate. For instance, if you’re earning a 12% interest rate, your money will double in 6 years. Similarly, at 6% interest, it will take 12 years, while a 24% interest rate will yield a doubling in just 3 years.
Now, let’s apply this principle to real-world scenarios. Picture having ₹2 crore at your disposal. If you let this substantial sum grow at an annual compound interest rate of 12%, it will blossom into ₹4 crore in just 6 years. To skeptics, I challenge you to verify these numbers with a calculator; you’ll find they align closely.
But here’s where the magic really happens. If you let this ₹2 crore compound for 60 years, following the Rule of 72, you’ll end up with a staggering ₹2048 crore. It may sound like an astronomical figure, but this compounding effect showcases the true power of long-term investments.
Even if your initial sum is more modest, say ₹20,000, the Rule of 72 still holds. At 12% interest compounded annually, this amount will eventually reach ₹2 crore. The lesson here is clear: every rupee has the potential to multiply if invested wisely.
Now, let’s address a crucial life philosophy: “get rich slow.” It advocates for a measured approach to wealth accumulation, urging individuals to invest rather than merely save. The essence of this principle lies in being mindful of your expenditures. If you’re contemplating a purchase, consider whether you could comfortably make the same transaction three times over. If not, it might be prudent to reconsider.
Furthermore, remember that the value of money isn’t static. An expense today could potentially equate to a fortune tomorrow. By adhering to this rule, you simultaneously spend and invest, creating a balanced financial strategy that ensures your wealth grows steadily over time.
Lastly, it’s important to recognize that consistent investments, even small ones, can lead to substantial gains. By reinvesting your returns and continuing to contribute, you expedite the wealth-building process. The power of compound interest, when harnessed with discipline and patience, can significantly accelerate your journey to financial abundance.
In the world of finance and wealth creation, there exists a remarkable tool that many are unaware of passive index funds. These financial instruments are designed to help individuals grow their wealth steadily over time, without the need for constant active management. So, what exactly are passive index funds, and how can they pave the way for a secure financial future?
To begin, it’s essential to understand the two main categories of mutual funds: active and passive. Active mutual funds are managed by fund managers who make investment decisions based on their analysis and expertise. Conversely, passive mutual funds, such as index funds, aim to replicate the performance of a specific market index, like the Nifty 50 or Sensex, without active management. This means that passive index funds operate on a set-it-and-forget-it principle, making them an excellent choice for those seeking a hassle-free approach to investing.
One compelling reason to consider passive index funds is their potential to outperform actively managed funds. According to data, passive index funds can deliver returns up to 2% higher than their active counterparts. This difference may not seem significant in the short term, but when compounded over the years, it can lead to substantial gains.
Let’s dive into a practical example. Suppose you have ₹2 crore at your disposal. If you decide to invest this amount in an index fund that tracks the Nifty 50, historically offering an average annual return of 14-15%, your wealth can grow significantly. While we previously discussed how ₹2 crore compounded at 12% could become ₹2048 crore in 60 years, a 15% return could potentially yield even greater results. I challenge you to calculate the figures for 13% and 15% returns and share your thoughts in the comments below.
Now, let’s talk strategy. When you invest in passive index funds, you benefit from lower expense ratios and minimal tracking errors. These factors contribute to lower costs and more closely mirror the actual market performance. To get started, you can explore platforms like the Finiti app, where you’ll find a selection of top index funds, including those tracking Nifty 50, Sensex, thematic funds, and global indices.
When it comes to investing, consistency is key. Establish a habit of investing regularly, even if it’s a small amount. Think of it as a parallel process to your expenses. If you purchase something for ₹5,000, consider setting aside an equal amount for investment. By adhering to this approach, you ensure that your savings continue to grow over time.
One crucial aspect to remember is to avoid touching your investments unnecessarily. Breaking investments prematurely disrupts the power of compounding. Let your investments ride the wave of time, steadily growing in value. It’s tempting to withdraw funds when the need arises, but if you can avoid it, your wealth will accumulate at an even faster pace.
In conclusion, passive index funds offer a straightforward and effective path to building wealth. With the potential for higher returns, lower costs, and minimal involvement required, they are an attractive option for both novice and experienced investors. By incorporating these funds into your financial strategy and staying disciplined in your approach, you can pave the way for a prosperous financial future. Remember, wealth creation is a marathon, not a sprint, and passive index funds can help you steadily cross the finish line.
Open Free Demat Account