Money Wise: What Does Freedom Mean To You?

What does it mean to be wealthy? Is it a certain amount of money, in the form of an investment portfolio or in your bank account, or even in physical assets like gold or property? For example, would Rs 3 crore make me wealthy? Rs 5 crore? Or would I need even more?

I find myself thinking about what true wealth is. Morgan Housel invites us to differentiate between being rich and being wealthy. The highest form of wealth, he writes, is control of time. It is the freedom to choose what to do and how long to do it. This ability to choose is the ultimate benefit of having ‘enough' money, even if it is a choice to keep working.

But this is a relatively modern concept. It took decades of shifting perspective to get to this point. People born around the middle of the last century here in India would likely give you a different answer. For them, nothing mattered more than the ability to put food on the table, to care for the immediate needs of their families and themselves. Their priorities in life and therefore, ultimately, their goals revolved around these needs. Understandably then, their children weren't given too much of a choice about which career to pick.

Fast forward to today. India is the fastest growing economy in the world – has been for some time. And young professionals entering the work force have the ability, because of the foundation laid by earlier generations, to contemplate financial freedom and everything that entails. They also have the means to achieve it. All they will need is a long enough runway, the patience to stay invested and the ability to not be overly influenced by greed or fear.

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Lage Raho

The Association of Mutual Funds in India data for the month of July is in and it is a heartening picture. Equity markets went through rough weather last month. Despite that, a flurry of new fund offers, and a rise in systematic investment funds meant that flows into mutual funds were robust. In fact, gross inflows through SIPs stood at Rs 28,464 crore, a new all-time high. What's more, inflows into actively managed equity funds stood at over Rs 42,700 crore.

Even adjusting for the close to Rs 9,000 crore that was mopped up through 10 new fund offers, the net inflow into active equity funds was sizeable. What I find interesting is that there were large inflows in multiple categories, with the most significant going to flexi cap, small cap, mid cap, large and mid cap and multi cap funds.

Even multi cap funds are finding many takers, with net inflows at Rs 6,197 crore in July.

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ICICI Bank's U-Turn

It only took a few days for India's second largest private sector bank to roll back (somewhat) its higher minimum average balance requirements for savings accounts opened after Aug 1. The initial announcement, which pegged the minimum average balance at Rs 50,000 in metro and urban cities, was subject to a fair degree of ridicule.

On Wednesday, ICICI Bank said it was reducing the requirement to Rs 15,000. Similarly the requirements in semi-urban and rural areas have been reduced to Rs 7,500 and Rs 2,500, respectively.

With savings bank interest rates as low as they are, many financial planners advise keeping only a month or two worth of expenses in these accounts. The rest can be held in an emergency fund, which can be a combination of liquid and arbitrage funds. For situations that require urgent money, a credit card can be used.

Maintaining a high balance, as stipulated by a bank, should only be done if the bank is offering preferential rates on loans or possibly attractive offers on credit cards, which are unavailable in any other bank. After all, there is an opportunity cost to maintaining a high savings bank account balance. 

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The Week Ahead

There's quite a bit happening globally that could have a bearing on near-term market trends. Chief among these is the high-stakes meeting between U.S. President Donald Trump and Russian President Vladimir Putin.

Having said this, the individuals who are investing through the over 9 crore SIP accounts have the right idea. Long-term wealth is created through consistency and time is your best friend.

Other Stories You Can Read:

EPFO Withdrawal Rules: How Often Can You Withdraw Money From Your PF Account?

Minimum Balance Rules: ICICI Bank vs SBI vs Bank Of Baroda vs PNB vs Other PSU Banks — Details Here

EPFO's New Facial Authentication Rule For UAN: What It Means For Employees

⁠Secured Your First Job? Here's How You Can Make Your First Rs 1 Crore By The Age Of 35

Income Tax Bill 2025: CA Shares ‘Why The Middle Class Should Pay Attention'
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Until next week, happy reading.

Alex