Updated on August 18, 2024 at 19:12 IST

3 myths you need to dispel if you want to grow your money – the mantra of top investor Nilesh Shah (Image credit – Linkedin/Nilesh Shah)

Market expert Nilesh Shahin a recent discussion on ET Now shared his expert tips on how to achieve financial independence through prudent and disciplined investing. Shah stressed on the importance of strategic investment decisions and debunked three common myths that often mislead investors.

Myth 1: Banknotes cannot grow over time

Shah began by addressing a common misconception among Indian households: the belief that banknotes appreciate in value when kept at home. “Please, please, please, all Indians should be aware that banknotes cannot appreciate in value, they only depreciate due to inflation. Please get rid of the myth that banknotes appreciate in value at home,” Shah stressed. He pointed out that between FY 2021 and FY 2023, Indian households invested Rs 4 lakh crore in mutual funds and Rs 2 lakh crore in equities, while a staggering Rs 9 lakh crore was kept in cash. Stressing that this behaviour works against wealth creation, Shah urged Indians to stop hoarding cash and instead invest in assets that yield real returns.

Myth 2: Wealth without risk

Another myth Shah debunked was the notion that one can get rich without taking risks. He highlighted that between FY2021 and FY2023, only 7% of household savings were invested in real return products such as mutual funds, bonds, debentures and equities. In contrast, 93% of savings were invested in low-yielding assets such as bank notes, deposits, insurance and small savings schemes. Shah warned, “How can you get rich with this type of asset allocation when 93% of your savings are not yielding real returns?” He acknowledged the complexity and fear associated with investing in riskier assets but stressed that avoiding these assets limits wealth growth.

Myth 3: One decision can influence everything

Shah started the third myth by saying how affirming a decision can affect all of us when we start our careers. He also illustrated the long-term impact of investment decisions by comparing the returns of Public Provident Fund (PPF) accounts with Equity-Linked Savings Schemes (ELSS). He explained that a monthly investment of Rs 12,500 in a PPF would grow to about Rs 1.07 crore over 25 years, which is tax-free. However, the same investment in an ELSS could grow to about Rs 4.4 crore even after taxes. Shah stressed, “Just one decision of whether to take a risk or not creates such a huge gap.”

In conclusion, Shah advised investors to invest regularly, stay disciplined and not put all their eggs in one basket. He recommended a diversified portfolio that includes bonds, stocks, real estate and commodities to keep risk and return in balance. “Regular investments, like small drops of water, make an ocean. Be a disciplined, long-term investor,” Shah urged, encouraging Indians to achieve financial freedom through consistent and informed investment decisions.