There are some myths so deeply ingrained in people’s mind, that it is impossible to deal with it. Well it is exhausting to say the least:

1. The elephant is a strong animal: Wrong. It is a big animal. The tiger is strong – and the African lion is far stronger. It weighs about 300 pounds and it can carry a 1600 pound bison and walk 500 m. There are many insects which can carry weights far greater than its body weight. Strength is not visible – it is measured in weight carrying and endurance!

2. If you are exercising regularly, you can eat whatever you want. Wrong. A good work out in a Gym (for an hour and under strict supervision) can burn say 800 calories. A couple of samosas will wipe out all the good work done. A healthy life is about eating sensibly, eating regularly, in moderation, exercising regularly, …ALL of this is needed. One cannot substitute for the other. Prevention is better than cure – remember?

3. Real estate never goes down: Too amusing, have written about it too many times! Real estate as a saving instrument is good, it is bad as an investment especially over long periods of 30-40 years.

4. Equities are Risky: Especially if you do not understand averaging 🙂

5. It will always be profitable if you buy gold, EVEN if you leverage: Complete nonsense. Over long periods of time and adjusted for inflation gold will give NEGATIVE returns.

 

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  1. Last one added by Ashish is the best of the lot 🙂

    By the way sir, what about Chit Funds that are backed by the state governments? Like ksfe.com has a number of chit funds (basically these are debt funds I understand) that has been historically giving a return of 12-15 % compounded for so many years now!! Any comments?

  2. Hi Subra,

    I am doubtful about your claim for gold. Gold was INR 180 per 10 grams in 1967 and is INR 27000 today which is a 12.5% compounded return for a fairly long time. Some people have calculated the data over 200 years and the conclusion is same.

    — Nir

  3. The real reason for buying gold (won’t classify it as investment nor expenditure) is to protect ourselves against geopolitical risks. If you really want to pass on your earnings/savings to your future generations, then gold is the best mechanism to do so (other than land, though it is not portable).
    Gold not only survives stock market crashes, it also survives:
    – Currency devaluation (against foreign currencies)
    – Estate taxes (try transferring shares of single holder, you’ll have to pay 12.5% tax BEFORE any LTCG)
    – Wars, famines, riots (typical situations where hyperinflation occurs)
    – Country regime changes/partitions/reunions
    – Currency note recalls (Rs. 1000/- notes invalidated…anybody remembers)
    – Bank bankruptcies (DICGC protects only Rs. 1 lakh per account)
    – Financial system collapses (Argentina…old currency gone, new currency instituted)
    Can’t think of more…but you get the idea.

    Gold should not be considered an investment at all. In reality, it is insurance of your savings over long term, not in nominal terms, but in real, purchasing power terms.

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