Confusing Real Wealth And Paper Wealth

wealthymattersOften people see the SENSEX/NIFTY values,property prices etc. and the GDP as one and the same or as proxies for each other.After all if the economy is good, the GDP and stock indices , property prices etc. are expected to rise.By doing so people are confusing real wealth and paper wealth.This confusion  especially happens to people who own stocks.And today an increasing number of people  own stocks,if not directly than through mutual funds.Incidentally, even debt mutual funds might have an equity component.In the insurance front, not just ULIPS but also the bonuses in traditional products are dependent on stock market returns.Blended funds in child plans and pensions also have an equity component.So today, many people with no intention of dabbling in stocks still have an equity exposure and are prone to confusing the rise in paper wealth due to valuation gains with a rise in real wealth. Read more of this post

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