FIXED INCOME FIXATION

Why too much safety is too risky

- Viral Bhatt

For decades, Indian households have followed one golden financial rule:"If it's guaranteed, it's good." Fixed deposits, PPFs, LIC endowments, NSCs have long been the go-to investment choices for millions of Indians across generations. And understandably so - these instruments offer capital safety, predictability, and peace of mind.

The irony? By trying to stay safe, you could actually be risking your financial future.

Comfort trap

There are strong emotional and cultural reasons behind India's fixed income obsession:

Trauma of past scams: Harshad Mehta and Ketan Parekh created a generation of riskaverse investors.

Elders' influence: Our parents and grandparents built wealth through LICs, FDs, and real estate.

Fear of markets: Equity is still seen as "gambling" by many middle-class savers.

Assumption of security: "At least I won't lose my capital" becomes the benchmark for decision-making.

While these beliefs may have worked decades ago, the math doesn't hold anymore.

Real-life example

Take the case of Mr. Iyer, a 55-year-old school principal from Chennai. He retired in 2020 with a 60 lakh corpus. Out of caution, he placed:

· ₹40 lakh in fixed deposits (earning ~6% pretax)

· ₹10 lakh in a traditional life insurance plan