# 1,00,00,000 ≠ 1,00,00,000

Investors love the idea of a small investment growing to Rs 1 crore. One crore is some kind of a psychological benchmark. Hasn't everyone noticed that a crore is no longer a crore?

Investment sellers are always trying to deal with the one crore problem. This problem most often manifests itself in the form of this question: If I invest in x investment at the rate of y per month, then will I be able to accumulate Rs 1 crore in z years. You can see this question in various social media channels, in the Youtube videos of 'finfleuncers', in financial agony aunt columns in publications and even newspaper headlines.

Generally, the challenge is to solve this equation for various values of x, y and z. Depending on which of the three variables the advice-seeker or the giver has filled in, the answer can be given to different levels of usefulness or uselessness, as the case may be. For example, if only z (the number of years), then a reasonably useful answer can be given. Unfortunately, in the most frequent form of this question, both z (years) and y (monthly amount) is a given. Sometimes, even the asset class is specified, as in: I can invest Rs 30,000 a month. I'd like it to become Rs 1 crore in 10 years. Which mutual fund should I invest in? In these cases, the question becomes like something out of a Bikram-Betal folk tale. There's no valid answer because the equation has to be filled in with values that permit no practical solution.

Of course, most of the time, 'one crore' is just a way of saying 'a lot of money'. However, beyond just the choice of investments, this fixation with a round number hides a far bigger problem, which is the reluctance to account for inflation. Suddenly, around the world, inflation has landed like alien spaceships from the sky and it's a good time to appreciate just how much damage inflation will do for your future.

The problem is that people think in nominal terms and the future impact of inflation is awfully hard to internalise. The real solution to this is that we (the world) should become a low-inflation economy but for the time being, things are moving in the opposite direction. Since a low-inflation world is clearly not on the agenda, savers should always adjust for inflation. If Rs 1 crore sounds like the kind of money you'll want twenty years from now, then you'll actually need to have about Rs 4 crore. If you work backwards from there, you'll need to save about Rs 68,000 a month if the returns are 8 per cent. That's a discouragingly large amount for what is hardly a 'rich' level today, but there it is, there's no escape from the arithmetic.

However, let's not move off without drawing the really important conclusion. What that actually tells you is that over long periods of time, you need a form of investment that's inflation adjusted. That equity is risky is drummed into all investors. However, it takes just a little thinking to figure out that inflation is riskier. And to match inflation, and to get real returns on top of that, you have to latch on to something that goes up with inflation anyway. This is not difficult because the value of goods, services and assets in the economy is inherently inflation-linked. And so risky or not, there's no other game in town.

Here's the most damning truth about inflation: Inflation takes from the poor and gives to the rich. Or rather, it takes from those who have fixed incomes and gives to those who own productive assets, which is the same thing really as the rich-poor statement, practically speaking. If an inflationary time is coming, you need to own productive assets, and there's no easier way to do that except invest in equity and equity-backed mutual funds.

The inflation solution

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