Warren Buffett, one of the world's most successful investors, says that those who want 'risk-free returns' are more likely to achieve return-free risk. At present, Warren Buffett said this to American bond investors. But this is more true for people moving towards retirement or retired in India. Savings, investors and investment advisors in India have taken root in the mind that savings made for retirement should be invested in a place where the level of risk is minimized.
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There is a special kind of thinking of the common Indian about investing for retirement. This thinking teaches that the savings made for retirement should be invested in such a way that the principal amount is protected or there is no loss at all. They forget that inflation is continuously reducing the real value of their money. Inflation can be anywhere from five to 12 percent annually. Some people are fortunate to get returns from things like property and they are able to cope with the effects of inflation in a better way.
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The risk of investment is said to be about short-term volatility in the market. There is a period of short term fluctuations in equity, but in the face of this risk, better returns are given as compensation. There is no need to worry about short-term fluctuations in long-term investments. Take the example of the last decade. If one had invested in a fixed income option during this period, he would have received a little over eight percent. If someone had invested Rs 10,000 a month in a fixed income option for 10 years, he would have got Rs 18-19 lakh.
