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Long-term Goals – Buying Home, Retirement, Wealth Creation

This is the marathon. Goals that are 5, 10, 20, or 30 years away. Time is your best friend here. The magic of Compounding works best in long-term goals.

1. The Power of Compounding

Albert Einstein called it the "Eighth Wonder of the World".

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2. Strategy: Aggressive Growth (Equity)

For goals > 7-10 years, Inflation is the biggest enemy.

  • FD/Debt (6%): Barely covers inflation. Wealth stays flat.
  • Equity (12%): Beats inflation by 6%. Wealth doubles every 6 years.

Golden Rule: You cannot retire on Fixed Deposits. You need Equity to build a corpus that outlives you.

3. Case Study: The Cost of Delay

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4. Key Long-Term Goals

A. Retirement Planning

  • Challenge: 30 years of no income.
  • Action: Maximize EPF, PPF, and NPS. Start SIPs early.

B. Children’s Education

  • Challenge: Education inflation is 10% (higher than CPI).
  • Action: Diversified Equity Funds. Shift to Debt 3 years before college.

C. Financial Freedom (FIRE)

  • Challenge: Accumulating 25x annual expenses.
  • Action: High savings rate (50%) + Aggressive investing.

5. Comparison: Asset Classes

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6. Exam Notes: Writing the Answer

Question: "Explain Long-term financial planning strategies." (10 Marks)

Answering Strategy:

  1. Define: Goals > 5 years horizon.
  2. Inflation Risk: Explain how inflation erodes purchasing power over decades.
  3. Equity: Justify why equity is needed (Real Returns).
  4. Compounding: Give the "Start Early" example.
  5. Goals: List Retirement and Home Buying as key examples.

Summary

  • Enemy: Inflation.
  • Hero: Compounding.
  • Vehicle: Equity Mutual Funds.
  • Action: Start Early, Stay Invested.

Quiz Time! 🎯

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