Take calculated risks...

Let’s talk about something we all face: risk. Whether it’s making life decisions or managing money, risks are everywhere. But there’s a huge difference between a random gamble and a calculated risk. The latter? That’s where smart wealth-building happens.

In today’s world, leaving money idle or sticking to low-yield options won’t cut it—not when inflation quietly chips away at your savings every year. So, how do we stay ahead? By investing wisely, diversifying, and taking calculated risks that offer higher rewards over time.

Let me tell you a story. I recently met Mr. Sharma, a 60-year-old retired engineer who continues to work part-time as a consultant. When I asked why he didn’t fully retire, he mentioned rising costs and inflation eroding his savings. He lamented, "If only I had taken a few calculated risks earlier and invested in growth assets like stocks or mutual funds, I’d be in a more comfortable position today."

Sadly, Mr. Sharma’s situation isn’t unique. According to recent data, nearly 27% of Indians above 60 continue to work because their retirement corpus isn’t sufficient. Pair that with an unemployment rate hovering around 7.8% (as of December 2024), and it’s clear why taking calculated risks early in life is crucial to building a strong financial foundation.

How Major Asset Classes Have Performed Over the Years

Here’s a snapshot of the growth in key investment avenues in India:

Breaking It Down: What the Numbers Tell Us

1. Stocks (Sensex)
   The Sensex has grown almost four times in the last 14 years, delivering an annualized return of about 11.8%. It’s volatile, yes, but over the long run, it’s a wealth-generating powerhouse.

2. Bonds
   Bonds are the go-to for stability, offering 7% annual returns on average. While they’re safe, they barely keep up with inflation over time.

3. Gold
   A favorite hedge against uncertainty, gold prices have also grown almost four times since 2010. It’s perfect for times of economic turmoil but doesn’t provide steady income or high long-term returns.

4. Real Estate
   Real estate has appreciated steadily, offering 7-8% annualized returns. Plus, it provides a sense of security through tangible ownership.

5. Inflation’s Impact
   Inflation’s silent erosion means that a basket of goods costing ₹1,000 in 2010 would now cost over ₹1,700. If your investments don’t outpace inflation, your purchasing power shrinks. This is why simply saving isn’t enough—you need to grow your wealth.

Why Calculated Risks Matter

Taking calculated risks is like planting seeds in a fertile garden. Sure, there’s effort and uncertainty, but the potential rewards? Totally worth it. Here’s why:

• Beat Inflation: Assets like stocks and real estate have historically outpaced inflation, helping you maintain and grow your purchasing power.

• Higher Returns: While safer options like bonds provide stability, stocks and gold offer opportunities for much higher returns over the long term.

• Diversification Reduces Risk: Spreading your investments across different assets cushions you against market volatility.

Steps to Take Calculated Risks

1. Determine if you are in Wealth Creation mode or Wealth Preservation mode
   It is very important to determine your current status because your strategy depends on it. If you are yet to build wealth (due to any reason - such as family responsibility, prior loans, losses etc.), you will need a different strategy. However, if you have already built a wealth, you will need different strategy to preserve it.

    

2. Focus on Aggressive Wealth Creation

   If you think you have not been able to sizeable wealth, you need to be aggressive. If you have at least 10 years to go before your goal, you can choose to be an aggressive investor. Aggression helps you build wealth faster.

3. Diversify Your Portfolio when Wealth is built
   Balance risky investments (stocks, real estate) with safer ones (bonds, gold). This strategy ensures you grow while staying secure. This is important when you have already built wealth and now you wish to preserve it.

4. Stay Informed
   When you check the portfolio, always reduce 20% and see if you are OK with it because 20% reduction in any of the asset is anyways possible if you are in wealth growth stage. However, if you are in wealth preservation stage, keep that number as 8%.

5. Consult a Financial Expert
   An expert can help tailor your portfolio to match your goals, ensuring every risk you take is a calculated one.

Conclusion: Take the Leap

Building wealth isn’t about avoiding risks; it’s about embracing smart, calculated risks. By understanding how different assets perform and aligning them with your financial goals, you can unlock the potential for significant growth. Remember, inaction is also a risk—one that could cost you your financial dreams.

Take that first step today. Assess your options, strategize, and act. Because every journey to wealth starts with a calculated leap of faith.

With you every step of the way,
Tejas Lakhani
Partner - Wealth
Fincare Services
Lakhani Broking India LLP

PS: Let’s design a strategy to take your financial goals to the next level. Reach out today, and let’s turn calculated risks into lifelong rewards!