Inflation Eats 74% of Your Returns Over 20 Years!
Your portfolio says you’re earning double-digit returns every year. But what that money can actually buy is growing far slower.
Hello there!
Over a 20-year holding period, assuming a 14% nominal return from the Nifty and 6% inflation, inflation eats ~74% of your total returns.
Let me say that differently. You think you made 14% a year, but most of that gain is an illusion created by a falling rupee.
Your actual purchasing power grew at barely 8% a year. The other 6%? Vanished into your cost of living.
The irony is, you still pay capital gains tax on the full 14%, including the portion that never made you richer.
Indexation once softened this blow. But after recent budget changes, most assets are now taxed on nominal gains.
That’s why portfolios look rich on screens but feel underwhelming in real life.
That gap between what your statement shows and what your wallet feels? That’s inflation. And over two decades, it takes ₹74 of every ₹100 of return you thought you earned.
So…
Before you buy:
Calculate your personal inflation rather than the government’s CPI. If you spend on private schools or healthcare, use 8-9%.
Check how the asset is taxed.
👉 Equities and mutual funds are taxed at 12.5% with no indexation.
👉 Real estate gets indexation only if bought before July 2024.
👉 SGBs are tax-free only if you’re the original subscriber holding till maturity.Every year:
Divide your current corpus by 1.06 for each year you’ve held it.
Example: 5 years = divide by 1.06 five times. If it’s flat or down, you’re not growing.
Before you sell:
Celebrate only returns above 6% per year. A 2x in 12 years is a zero real return.
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Finology’s Exclusive Updates
01. Finology 30 Stock Update: The Rent Collector
Finology 30’s latest stock is now available.
We picked it because of its long-term rental moat and operating leverage advantage,
The full research report, along with the company name and Buy It Below price are available in the Finology 30 dashboard.
02. From Quest: Module 6 - Valuation Over Price
“Price is what you pay, value is what you get.” — Warren Buffett.
Investors track price action, but rarely interrogate the valuation behind it.
Our latest module addition to The Finology Stock Analysis Course forces you to separate the two.
Learn about:
Enterprise Value: Move beyond P/E and understand what you’re actually paying for the entire business.
Promoter Holdings: Identify real conviction. Track ownership patterns to see who has skin in the game and who doesn’t.
ROCE vs ROE: Separate genuine efficiency from leverage-driven returns. Know what’s actually driving performance.
Banking Deep Dive: Banks operate on a different framework. Learn the metrics and lens required to value financial institutions correctly.
03. From Ticker: Powering the AI Backbone
While most focus on AI software, the underlying demand is building in data centres.
India’s capacity is set to hit 1.7 GW by the end of 2026. AI servers consume far more power and generate far more heat, creating demand for cooling and electrical infrastructure.
What to focus on this week?
Track Cooling Demand:Blue Star and Voltas are expanding into data center cooling.
Break Down Power Players: Look at ABB India or Hitachi Energy. Use DuPont to check if ROE comes from margins.
Compare Valuations: Use the Historical P/E chart to see if re-rating has run ahead of fundamentals.
AI needs power and cooling to scale. Use Ticker to spot the companies building that backbone early.
Game Time! 🧠
That’s all in The Finology Letter!
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