Your explaination is just like teaching ABC to kids. The problem here is, implementation and descipline.Many of us, including me fail to implement it when it come to practically doing it.

Let me tell you, we all understand that Equities are best to be brought when they are not doing good. Or in other words when the market is down. Historically we see when market is going down the amount of buying happens is very less.

There are only few who buy and make money. We invest in equity and hope that our capital to be protected. the day it goes down by 15% we think, equity is not my cup of tea and exit. This is when we get on to fixed deposits again.

No wonder why almost 50% who make money from market is a resident of mumbai & the real estate prices dosent falls there. New york is the city which has 40% of the ultra rich billioners of US too….

This inflation concept is misinterpreted and highly skewed in favour of Equity. It could make a difference to the HNIs but 90-95% of the tax payers who are earning less than 10 lacs per annum, the inflation concept is overblown.

We have an article in Jagoinvestor currently and we can get the statistics. 30% of the tax pay is not applicable to a greater majority. On the top of it many are investing in PPF which are giving tax exempt throughout. My mantra is simple. If someone is earning more than 20 lacs, they could look for equity investment. Honestly most of the non-30% Tax payers should be happy with the tax saving instruments which infact they struggle to max out. Let them not risk much more worrying about inflation and real returns.

is inflation only 8% ? i wonder why we are fixated with the number 8 – all financial planning in india seems to use this number as a thumb rule.
inflation is subjective. the poor face more inflation than the rich.
the cost of living for the poor -food,housing,medicine,education is thru the roof.
prices of LED TVs,computers and tablets and fancy foreign vacations -which constitutes a major part of higher income people’s spending -is usually on the way down.
the poor need more inflation protection.but is the share market the right instrument for them? i am doubtful.
there is no solution outside of a ‘sound’ money regime.
when inflationism is the official govt policy,the poor have nowhere to go

sneha -index or not.it is a mere chance you are taking on govt’s whimsical decisions on monetary policy -which is decidedly deficit financing and inflationism.
the poor ARE screwed.
the index is a good way to feel smart and yet lose money for the poor.most of the poor live hand to mouth. now i dont count those earning X lacs per year as poor. poor = those who dont have any investible surplus.
it is not as if inflation comes out of the blue from some random external source like bad rains or oil speculators.there is a direct line of causation to active govt policy of money printing,subsidizing (and distorting prices) and massive borrowing to throw good money after bad (air india,kingfisher bailout etc)

The equity returns are in the range of 10-15% over a period of 20 years. With tax saving instruments like PPF, the ordinary employees would be able to generate the same return.

It makes sense to look at equity if the returns are 30% over 15-20 year period. But they are not. What is the point in taking 30% tax bracket as an example where most of the tax payers do not belong to and scaring them with low figures of real returns.

@krish
‘It makes sense to look at equity if the returns are 30% over 15-20 year period.’
it is unrealistic expectation, is not? other day, i come to know that land price in our area raised to 1000 times in last 40 yrs , and i found that the irr for 1024 times in 40 yrs is 18% p.a. for that land. as such , for compounding , 10% to 15% p.a. makes lot of difference for 30-35 yrs of service period or even 20 yrs. period.

Subra It Only Means…worlds 8 wonder…COMPOUNDING as a concept is Miles away from Lay Investors…….. from einstein to date lay man is at same place as far as understanding compounding !! A seemingly innocent 1 percent diffrence over 30 years …..need to be put in perspective with an apt article or series of articles from our Subra ,IF AND ONLY IF YOU FEEL APPROPRIATE.It will make complete concept clear to one and all …..For Retirement “A friend in Need ( Compounding) is a friend indeed ….

subra sir,

i think, common sense , says the equity as a class of assets beats inflation (is capable to give a positive return over inflation) over a period of time. because businesses are for profit making (whether doing or not, is different matter) and they are adding values of their products or services. for Indian environment , for laymen, instead direct equity, selected diversified equity mutual funds could be better. studying my portfolio (of diversified equity mfs) i found following performance between dt.1-07-2009 to dt.29-05-2012:(all gains in absolute % )

bsl div. yield plus- 54% ,icicipru discover-72.66%
idfc premier equity-64.68%,
quantum long term eq.-52.85%, icicipru dynamic-44.94
uti div. yield-42.15% ,hdfc equity-40.27%
templeton india eq.income-36.13%, hdfc top 200-29.91%
sensex-12.24%, nifty 50-15.19%, nifty midcap-29.54%

my point is that during about 3 yrs’ period of stock market volatility , the above funds gave better than fd return , though the indices could not perform. it is for patience and faith in your beliefs, i think.