5 investing ideas that changed over generations
Investing has changed over the past few years and across the generations, the spending as well as saving the pattern of the average Indian has changed drastically. Mentality, perspective, behavior, understanding and a lot more things have changed over a period of time. The perspective of a young working professional today is based on a considerable higher risk appetite as compared to his elder generations. The version where your money could garner a higher return, provided it was exposed to a higher risk was not acceptable to the previous generation. Their main focus was on debt investments, which provided a high level of security. So let’s see in detail what generation gap has taught us regarding financial stability.
Debt investment is the best option
According to the old mentality, savings should always be done where it is the safest with zero risks. Now accordingly to the above statement, only one option is available and that is fixed deposits or post office schemes. But now as we all know, the banks offer a much lower rate of interest as compared to inflation which essentially erodes our money in the long term.
The average inflation rate in India approximately was 8.7%. Most fixed deposits give about 7.5% after tax deduction and some give 8.5% tax before tax deduction. Hence, the real rate of return on our investment is much lower.
Insurance should give RETURNS
This mentality hampers the whole idea of investment and insurance. Both are separate entities and should not be mixed. If you are taking an insurance in order to get a tax rebate or to expect some return from it at policy maturity, then I am sorry to say but your concepts need a major change.
PPF investments are enough
Yes having a PPF account is a very good idea to generate a good corpus in the long term, but you need to remember how much to put in that account. As we all know that the market inflation hovers around 9% , and the interest rate offered by PPF is about 8.1 %. So essentially your money is reducing in value. However, amongst all the other investment options, a PPF account still holds good value.
Note: Invest the maximum amount in the early years, to gain most from the power of compounding.
No need for health insurance
People in the earlier days felt that taking a health insurance was a pure waste of money. In the rare possibility of they falling severely ill, that policy would come to the rescue. This seemed too illogical, so the majority of the Indians did not avail any health insurance. Today, the young working population understand the power and importance of a health insurance very well.
No need for life insurance
People preferred to own plots or store money in hard cash (read better liquidity) instead of buying a term plan. They understood that in their absence, their family should be taken care of but their manner of saving money was completely wrong. Simply storing cash meant that it was highly susceptible to theft amongst other things. Having a life insurance policy is was a good option because it provides a safety net for your near and dear ones.