By 
The concept of generational wealth — assets that are built, preserved, and transferred across generations — has historically been associated in India with physical assets like agricultural land, commercial real estate, and jewellery. These assets, while valuable, come with the challenges of indivisibility, illiquidity, maintenance costs, legal disputes, and taxation complexities. The modern financial ecosystem, built around trading apps that make equity investment accessible and the demat account that holds securities in a legally clear, easily transmissible electronic form, offers an alternative path to generational wealth creation that is uniquely suited to the realities of contemporary Indian families.
Why Equity Is the Superior Long-Term Wealth Builder
The history of the equity markets in India in terms of wealth creation and growth is very attractive. Over a period of time, despite recessions, crashes, political and regulatory transitions, and sector-specific issues, the Indian equity markets have given very healthy returns, way higher than fixed deposits, bonds, real estate and gold.
This is not surprising as all equity owns give a share in the profits of the company. The profits of the companies, in turn, reflect the productivity of the economy. In fact, India is one of the most attractive economies to invest in, due to the demographic dividend that its young population presents, the size of its consumer market, its potential as a business hub, the push for a digital economy and its overall development trajectory
As such, being invested in the Indian equity markets allows you to be part of the growth story of the economy.
The Power of Starting Early
The most important thing about investing in equities or, for that matter, any instrument that gives compounded is the number of years. The number of years of investment has a far bigger impact on the final corpus than the rate of return itself. The chart below will give you an idea about the power of starting early.
A rupee invested at 12% will give you 29.96 rupees after 30 years. The same rupee invested at 20 years gives you 9.65 rupees. The 10-year difference between the two time periods makes all the difference.
For a person investing in their early twenties, it might make sense to pay off any education loans and build an emergency corpus first before starting to invest in the stock market. However, once the initial requirements are met, a young person must start investing in the stock market as early as possible. It will have a huge impact on the corpus at retirement.
Passing on Wealth to the Next Generation
One advantage of having wealth in the form of equities (in depository form) is that it can be passed on to the next generation with relative ease. If you have a nominee registered against your depository account, they can get the securities transferred to their demat account upon submission of the necessary documents upon death.
This is far more convenient than the process for property or jewellery. Parents can also open depository accounts for their minor children, which will be controlled by the parents until the age of majority. These accounts can be used to start building an investment portfolio for the child. It is a great way to start young while also setting an example for the child.
The Role of an Advisor
With most things being digitalised these days, the need for an advisor has been questioned. People believe that the information available online and the ease of use of various investment platforms makes the job of an advisor redundant. This is largely true for simple investment needs like a salary investor looking to park money in large cap mutual funds or index funds
However, if you have more complex needs, the role of a financial advisor is essential.
Events like inheritance of large sums of money, selling of a business or property, retirement planning and distribution of wealth among family members and so on. A good financial advisor, who is SEBI registered and follows the fee-only model (no commission-based) can help you navigate through these difficult times and give you good financial advice. The cost of good advice is nothing compared to the cost of bad advice, and most financially literate people in India know this and take the help of financial advisors.
Comments