Thinking beyond FDs and PPF: Strategies for achieving financial freedom

Over a two-decade career in financial services, I have encountered hundreds of individuals who have either achieved or are steadily heading to financial freedom. Gutsy entrepreneurs who made it huge in business. Driven professionals who climbed to the top of the corporate ladder, Athletes in their prime and at the pinnacle of their respective sports and thousands of hardworking regular folks saving and investing wisely for their financial freedom–that state where they have accumulated enough money that they don’t need to work, if they don’t want to. There is only one kind of person I have not encountered so far–someone who has achieved financial freedom purely thanks to saving in fixed deposits or provident funds! And I don’t expect to ever.

Safe investments like fixed deposits or government savings schemes are excellent and should be integral to all portfolios. But only to a certain extent. You need to diversify your investments to create long-term, meaningful wealth and achieve peace of mind. Some asset classes that you should not ignore are:

1. Equities

Historically, there has been no better asset class than equities to create long-term wealth. Take India’s example–if someone has invested in the Indian stock market at any point in the last four decades and held on to the investment for at least ten years, they would have never lost money. And on average, their investment would have multiplied five times! If you hope to achieve financial freedom, it won’t be easy to do so without having some equities in your portfolio. Yes, they can be somewhat risky, but there are numerous ways to manage the risk, and you can formulate your strategy basis the amount of risk you are comfortable with. But you cannot ignore equities altogether–financial freedom will be an uphill task without them.

Also Read: Buying a new house? Be prepared for these 10 additional expenses

2. Gold

Gold is another asset class that should be a part of all portfolios. It may not consistently deliver stellar returns, but it is essential for diversification. It is a safe and solid asset and does well when times are bad. So if markets are crashing or banks are in trouble, you can always depend on that little bit of gold–whether jewellery or a gold bond, to get you through difficult times. 

3. Real Estate

This asset can be a trusted companion in your journey to, and particularly when you have achieved financial freedom. Property markets are volatile, and you don’t want to be at the mercy of a landlord or the economy, especially when you don’t have an income coming in. Owning your own home may or may not be the best decision financially in terms of returns. Still, it certainly gives you tremendous peace of mind and empowerment.

Like everything in life, you need to strike a balance when it comes to your financial planning. Safe and solid investments like FDs and PPF are required. But you need a healthy dose of equities to create wealth and beat inflation. In addition, it would be best if you had some alternative assets, such as gold and real estate, to diversify your investments.

And finally, you need one critical attribute to succeed in the quest for financial freedom. We are in an age where people demand information from a 3-line tweet or 20-second reel. So if you have reached the end of a 600-word article, I am confident that you have more than enough of it–patience!

(By Rishi Piparaiya – Best Selling Author and Financial Mentor. Views are personal.)