Rs 1 crore sounds like a huge amount. You might be thinking that if you accumulate Rs 1 crore after 25 years from your investments, you will be completely financially secure. But will it be like that?
The problem is inflation. Inflation reduces the power of our money a little bit every year. The thing that is available for Rs 1 lakh today, the same thing will probably be available for Rs 2-3 lakh after 15-20 years. In such a situation, if the inflation rate remains 5%, then how much will today’s Rs 1 crore be worth in 2050?
How can inflation weaken your savings?
If you are investing in savings schemes like FD, PPF, NPS or EPF, then you also have to see whether their returns can beat inflation or not. Inflation rate in India has been between 4% to 6% in the last few years and if inflation continues to grow at an average rate of 5% for the next 25 years, then the real value of your current savings will gradually decrease.
If you get Rs 1 crore after 25 years, what will be its purchasing power? Let us also remember that when we talk about returns given by a particular savings instrument, we should also keep in mind the actual inflation that will keep eroding the value of your savings over the investment period.
The real value of your money between investment and inflation
If you have set a target of earning Rs 1 crore after 25 years, then it is important to see which fixed return investment options can give some protection against inflation?
Fixed Deposit (FD) – Estimated Return: 6.5%
FD is considered a safe investment, but its return is close to inflation. If you are getting a return of 6.5% and inflation remains at 5%, then in reality your wealth is growing by only 1.5% per year. But let us first tell you how much you need to invest now to reach a corpus of Rs 1 crore in 25 years. To get a corpus of Rs 1 crore by 2025, you need to invest in 2025 a sum of Rs 20 lakh, on which an annual return of 6.5% can get you to your goal.
Here it must be noted that the maximum tenure of an FD plan can not be more than 10 years,
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