“My daughter Ananya is so smart, ask her about any feature of my smartphone and she can show you how it works” narrates Mrs Gopalan about her 9-year old daughter to Mrs Gupta whom she met on one of her travels. “Oh yes, these kids are too smart and learn very fast. Any new gadget and they know all about it much before us. Sahi mein, Zamana badal gaya hai” replies Mrs Gupta.

This is a common conversation we hear about the current generation of kids. It may be true because these kids were born after the entry of mobile phones and have grown up seeing the gadget advancing in both technology and features. In fact, it is very difficult for them to imagine that a world without these gadgets ever existed before. We too are happy to live with this change as we have seen similar changes when we changed hands with our earlier generation popularly called the ‘generation gap’. But are there areas where the ‘generation gap’ has not made an impact? Well, yes, one of them is ‘Investments’.

‘Investments’ is one area which continues to be carried forward from one generation to the next without much change. For example, we continue to hold Bank / Postal Deposits, Gold and Real Estate as our staple investments. We still consider insurance to be an investment and not a protection against risk. We still crave for assured returns and ask “Kitna Milega” for every investment (except gold and real estate). The following is so strong that bank fixed deposits (FDs) amount to about Rs 130 lakh crore mark¹. Just imagine, bank deposits had a strong following when interest rates were in double digits and continue to be popular even now when bank FD interest rates are around 6.25% per annum².

What is the need to change now? With declining interest rates, the returns from bank FDs may not be sufficient to build the corpus needed to meet future goals as cost of goals is rising fast year after year owing to inflation. Further, gold and real estate too have gone beyond the reach of the middle class because of the higher ticket size.

What is the way out? We need a shift in mindset so as to look beyond lower risk /assured returns investments  and include some proportion of relatively higher risk investments like mutual funds in your portfolio for their potential to beat inflation in the long run. You can start a mutual fund account for as low as Rs.500 per month but remember they offer market linked returns and not assured returns. You can invest (monthly) through a systematic investment plan or SIP. We believe it’s time to say - Zamana Badal Gaya Hai, Chalo Hum Bhi Badlein.

¹Source - Reserve Bank of India Weekly Statistical Supplement (data as of October 25, 2019)
²Source –State Bank India Term Deposit rates for tenors of 5 years and upto 10 years with effect from Oct 10, 2019

All names and situations depicted in the blog are purely fictional and serve the purpose of illustration only. Any resemblance between the illustrations and any persons living or dead is purely coincidental.