Does Inflation really Hit you As HARD as your Financial Advisor wants you to believe?

29^th April 2022

 

Does Inflation really Hit you As HARD as your Financial Advisor wants you to believe?

 

Dear Fellow Travelers,

 

Namaste! There are some commonly accepted norms or beliefs in our day-to-day life and we hardly question the correctness of the same. One such belief is about Inflation. Typical financial advisor will talk about financial planning with the word inflation. With his presentations he can make you believe that you will need tons of money to support yourself in future compared to now. In fact, in the field of investments also earning a fair return over and above the inflation rate is considered as a prudent investment. 

 

I am sharing some ground realities with respect to the above beliefs. You will be surprised that the FACTS are 100% opposite of your BELIEFS about inflation hitting you hard. 

 

How inflation rate is determined?

 

Government has list of Commodities / Services. They track the prices of the same periodically. They average out the increase / decrease in the same and present the final results as a rate of increase or decrease. Normally, the prices move up only. So, we have a positive rate and that rate of increase is called as inflation. Simple. 

 

Now, they have all the things which are needed for the consumptions. Say a person is a Vegetarian but the CPI basket also track the prices of NON VEGITARIAN items while giving the final rate. It may happen that in some period Vegetarian food items prices moves up sharply and, in some period, non-veg items prices moves up sharply. CPI will show the average of the same. But the individual consumer who is VEGITARIAN will not get affected by the increase in the prices of non veg items and vice versa.

 

So, in short, inflation will affect you or me depending on our consumption items and not based on the inflation rate given by the governments.

 

Let me make it simple – today we have 44–46-degree temperature in some parts of India. But in the north parts they don’t have that much temperature. In fact, they might be using heaters to heat up their homes. But the media will talk about the HEAT WAVE. 

 

What was your LOCKDOWN experience?

 

Luckily for our generations, we had 3 months lockdown in 2020. No maids were allowed, no cooks were allowed. Many people stopped the newspapers also. No movie, no restaurant and no socializing. See your expenses in that time. It was your real expenses. 

 

When you are planning your life ahead with respect to your expenses – you need to list out all the good and services you are regularly using. This list will change with the AGE and other Situations. Say today you have more consumption for FOOD, tomorrow you may have more consumption for MEDICINES. Today you are able to do your work, tomorrow you may need an assistance. 

 

So, don’t look at the general inflation rate as it is misleading as far as an individual is concerned. To explain this in Share market perspective – Say NIFTY has moved up 100% from May 2020 levels. Individual stocks may have moved up by 500% or may have gone down by 20%. It all depends on the stock which you have. The same logic is applicable for INFLATION. 

 

Should you worry about inflation or Hyperinflation?

 

If you have prepared your list as per above and if you are tracking your own basket or your expenses, year over year, you will be knowing the actual impact of inflation in your life. 

 

When you are knowing the impact, you will be able to plan it wisely without getting impacted by FEARFUL presentation of a typical FINANCIAL ADVISOR.

 

How about inflation and investments?

 

I am a Buffett disciple in words and deeds. For me investments are a love affair first and money making is second. If you have loved your investments from the day one – they will never ditch you. If at all they ditch you – you will not be affected emotionally. 

 

Believe me or not, I am sharing my personal experience and observation of the great investors, those who are using investments as a money-making tool, are going for a cheap transaction. If you have invested properly, money will flow automatically and you don’t have to spend sleepless nights for the money. 

 

If you are getting excited and fearful with respect to your investments – let me give you good news – you are doing something else and not the investments.

 

Market and existence are the smartest phenomenon you are dealing with. Nobody can CHEAT them. 

 

So, be clear with your deep-down intentions while you invest. In the END the problem is not with the MARKET or with the investments – the problem is with your hidden intentions which surfaces when you meet the adverse situations in your life or market. 

 

What NEXT?

 

If you are doing investments with AWARENSS, I assure you, all your Money problem for LIFE will be taken care of automatically. You don’t have to plan it with EXCEL SHEET with your financial advisor. Believe me or not, EXCEL sheet is a very dumb way to plan a dynamic phenomenon called life. 

 

If you really want to make a difference in your life with respect to money and in your attitude towards Money, be with us for 3 years and see the magic. 

 

Follow me on Twitter @hiteshmparikh / WhatsApp - +91-9869425399.

Learn a Lesson. Live with Passion & Invest with Reason.

Hitesh Parikh.