Making of Glide Portfolios – Part 1- The Need of Wealth
India is a land of millions of dreams and billion-dollar startups. The effects of pandemics on the economy are in the rearview mirror and the economy is growing at a steady pace. We are on track to cross $5 trillion dollars in GDP in the next few years. There is ample opportunity for wealth creation with government schemes in place to encourage both domestic entrepreneurship and attract foreign investments to our country. As per Deloitte’s survey (India FDI opportunity), global businesses are confident about investing in India with about 44% of those surveyed already planning investments.
While not everyone can launch a successful business or startup, wealth creation is a possibility for each and every one of us via regular investments in a goal-based asset allocation portfolio. Confused? Fret not because we at Glide Invest will do the hard work for you. Using your risk profile and investment horizon provided in your goal, we will structure an efficient asset allocation portfolio that will help you in the fulfilment of your goals and aid you in your wealth creation journey.
Why create wealth?
The journey towards wealth creation begins with a simple question, why do you do it? The most common answers to this question range from enjoying luxuries to contributing to society via charitable ventures with retirement and financial freedom thrown in the mixture. The primary reason one must indulge in activities that lead to wealth creation is to maintain or improve one’s current lifestyle even after retirement.
Nobody wishes to work forever. We all wish to retire one day and devote our time to worldly pursuits unrelated to our professions or careers. However, while our salaries will stop, our expenses will not. Not only do our expenses remain, but they also grow every year aided in their rise by the forces of inflation.
Here is a look at some of the stuff from our daily life and how their prices have changed over the years:
Inflation erodes the value of money and over a period of time will significantly reduce the value of one’s savings unless the money is invested into instruments that tend to grow at a rate higher than inflation. The price of essentials as well as luxuries will rise over time and its pinch will be especially felt after retirement when income stops. Unless one finds a way to build a corpus that can help maintain the same lifestyle after retirement as it was before, retirement sounds like a tough experience.
Another aspect of wealth creation that is often ignored is the double burden of healthcare expenses and lifestyle creep. Let us explore the two in some detail.
Healthcare expense is a simple and logical thing to expect as one grows older. Our bodies behave quite differently at 60 years of age than at 40 or 20. Slipping and falling while walking would not even hurt a 20-year-old but would break the bones of someone at 60. Additionally, health care in India can be quite expensive as it does not have a universal health care system and health insurance is yet to take off. The added considerations of healthcare and hospitalization expense too must be borne after retirement which can be considerable since there is no income to offset it.
The final prong of the ‘why create wealth’ trident pointed at us is lifestyle creep. Lifestyle creep, also known as lifestyle inflation is the increase in discretionary spending that accompanies an increase in income. As one grows and gains experience in their jobs or business, their income increases correspondingly. This often leads to a corresponding increase in the discretionary expense which sometimes can be detrimental and completely avoidable. The price of essentials does not grow at pace with income growth. Food will cost the same irrespective of you earning 1 lac a month or 10.
However one starts to favour higher luxuries in life. The bike is replaced by a car, small TV gets replaced by a big TV, and normal restaurants are replaced by 5-star restaurants and so on and so forth. One gets used to a higher quality of life and that requires money to maintain. In order to maintain that same lifestyle after retirement, there has to be a provision to get income to be able to meet that lifestyle else it will lead to a drop in quality of life and frustration.
Having faced the triple threat of inflation, increased expenses and lifestyle change, we now know why we have to create wealth. In the next blog, we talk about various asset classes that will help you in your wealth creation journey and make retirement smoother and easier for you.