Inflation Is Sinking Your Ship

 Inflation is often called the silent killer of financial wealth. But to truly grasp its impact, let’s visualize it with a metaphor.

Picture this: You’re sailing across the ocean in a ship that holds all your wealth. The skies are clear, waters are calm. But there’s a small problem—there’s a hole in the bottom of your ship, and water is slowly seeping in.

That hole is inflation. And it is gradually eroding the purchasing power of your money.

The Rate of Water Inflow = Inflation Rate

Let’s say water is entering your ship at 6 liters per minute. That means unless you find a way to remove 6 liters per minute, your ship will eventually sink. Similarly, if inflation is at 6% per year, your money is losing 6% of its value annually. It means that ₹100 today will buy you goods worth only ₹94 next year. The only way to stay afloat is to generate returns of at least 6% per year, ensuring that your purchasing power remains intact. If it earns anything less—say 3% in a savings account—you’re losing value in real terms every single day. It’s like removing 1 spoon of water for every 2 spoons of water entering the ship. Eventually, the ship sinks.

And the Bad News is : You Cannot Plug This Leak, It will Always Be There

If your money isn’t growing faster than inflation, it’s not saving you—it’s silently sinking you.

Bailing Out Water: Investment Options

To survive, you need tools to remove water from your ship—just like you need investments to outpace inflation. Let’s compare different investment options to different tools for bailing water out:

  1. A Small Cup (Bank Savings, Fixed Deposits 💰)

    • Provides minimal relief.

    • Works only if inflation is very low.

    • Guaranteed to fail if inflation is high.

  2. A Bucket (Bonds, Debt Funds 🪣)

    • A step up, but still struggles if inflation is high.

    • Some debt instruments may provide post-tax returns close to inflation.

  3. A Manual Pump (Balanced Mutual Funds, Real Estate 🚰)

    • A mix of equity and debt, offering moderate returns.

    • Can match inflation but might not always outperform.

  4. A High-Powered Pump (Equity Mutual Funds, Stocks ⚡)

    • Has the potential to outpace inflation significantly.

    • Equities, over the long term, can generate real wealth by exceeding inflation.

The Bottom Line: Keep Your Ship Afloat and Moving!

Inflation never sleeps. It eats away at your money every day. Inflation is inevitable, but sinking with it is not. The key is to choose the right tools to bail out water efficiently and keep your financial ship not just afloat, but sailing toward prosperity. Relying solely on savings to fight inflation is like using a small cup to empty a flooding ship—no matter how fast you scoop, you’ll eventually sink. For real growth, you need a high-powered pump—investments that can beat inflation.

The question is: Are you prepared to keep your ship afloat, or will you let inflation sink your wealth?

Prasad Yelgodkar

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