The Balanced Middle Path: Growing Savings with Stability

In my earlier posts, I wrote about the three ways you can grow your savings—slow and steady, balanced middle path, and high-risk fast growth. We met Ramesh, who prefers safe investments like fixed deposits, and Arjun, who is comfortable with high-risk bets for potentially huge rewards.

Today, let’s dive deeper into Priya’s story—someone who chooses the middle path. This path is all about balancing growth and safety, and for many working professionals in India, it’s the most practical and effective approach.

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Priya’s Story

Priya is 30 years old and works as a software engineer. She earns a comfortable salary, manages her expenses well, and is disciplined about saving. She knows that putting all her money in fixed deposits won’t help her beat inflation, but she also doesn’t want the stress of watching her wealth swing wildly in risky investments.

Priya’s solution? She follows the balanced middle path—investing in products that provide steady growth, moderate risk, and long-term compounding benefits.

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What the Middle Path Looks Like

The middle path is like driving steadily on a safe highway. You move faster than a bicycle (slow & steady investing like FDs), but you’re still within guardrails that prevent major accidents.

For people in their 20s, 30s, and 40s, this is often the sweet spot—your money grows at a healthy pace without exposing you to extreme volatility.

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Popular Middle-Path Investment Options in India

If you’re like Priya, here are the most common ways to walk this balanced road:

1. Systematic Investment Plans (SIPs) in Mutual Funds
   This is the most popular route today. SIPs allow you to invest a fixed amount every month into equity or hybrid mutual funds. Over time, SIPs benefit from rupee cost averaging—you buy more units when markets fall and fewer when they rise. This smoothens out volatility and builds wealth steadily.

2. Index Funds & Exchange Traded Funds (ETFs)
   These track benchmarks like the Nifty 50 or Sensex. They are cost-effective, diversified, and usually deliver returns close to the overall market growth.

3. Large-Cap Mutual Funds
   These funds invest in established companies with proven track records. They are less volatile than small- or mid-caps, making them a stable choice.

4. Balanced / Hybrid Funds
   A mix of equity and debt within one product. Ideal for investors who want professional management without actively monitoring asset allocation.

5. National Pension System (NPS)
   A retirement-focused investment that allows allocation across equity, government bonds, and corporate debt. It also comes with attractive tax benefits.

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Why SIPs Stand Out

Among all these options, SIPs have become a game-changer for Indian investors. They’re simple to start (you can begin with as little as ₹500 a month), enforce discipline, and don’t require you to “time” the market. For someone like Priya, who invests ₹10,000 per month in an equity SIP, the long-term results are significantly better than traditional deposits.

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A Simple Illustration

To see how powerful SIPs can be, let’s compare them with fixed deposits:

📊 Priya invests ₹10,000 every month for 10 years.

• In a Fixed Deposit (6% annual return), her money grows to about ₹16.4 lakhs.

• In a Systematic Investment Plan (equity mutual fund SIP at 12% CAGR), her money grows to about ₹23.2 lakhs.

That’s a difference of nearly ₹7 lakhs—without taking extreme risks.

The chart below illustrates this comparison:

It’s clear that while FDs provide safety, SIPs on the middle path combine discipline and compounding to deliver significantly stronger results. Priya doesn’t need to chase high-risk bets; she simply stays consistent, and her money works harder for her.

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The Takeaway

Priya’s story highlights why the middle path works so well. By choosing SIPs, index funds, and large-cap mutual funds, she enjoys steady growth, peace of mind, and protection from inflation.

For most working professionals, this path is the most practical way forward—it ensures your savings don’t sit idle, yet you don’t carry the stress of volatile, high-risk investments.

In my next post, we’ll explore Arjun’s adventurous route—the high-risk, fast-growth path—and discuss where it fits into an overall financial plan.

The Slow & Steady Path: Growing Your Savings Safely

 In my previous post, I spoke about the three ways to grow your savings—slow and steady, medium-paced, and high-risk fast growth. We met three characters: Ramesh, Priya, and Arjun. Each of them chose a different path based on their goals and stage of life.

Today, let’s take a closer look at Ramesh’s path—the slow, low-risk, steady approach.

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Why Ramesh Chooses Safety First

Ramesh, a 40-something schoolteacher, values stability over speed. His savings are the result of years of hard work, and he doesn’t want to risk losing them to market volatility. For him, wealth isn’t about chasing big returns; it’s about ensuring his family’s needs are always met. That’s why Ramesh sticks to the slow & steady path of investing. It may not double his money quickly, but it gives him peace of mind. And in personal finance, peace of mind is priceless.

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Investment Options for the Slow & Steady Path in India

For those like Ramesh, India offers several reliable, low-risk options:

1. Fixed Deposits (FDs)
   The classic choice. Banks and NBFCs offer FDs with guaranteed interest rates, usually higher than a savings account. While rates fluctuate, the safety and predictability make FDs extremely popular.

2. Recurring Deposits (RDs)
   Perfect for disciplined savers. You invest a fixed amount every month, and at the end of the tenure, you get your principal plus interest. It’s like setting up an automatic savings habit.

3. Public Provident Fund (PPF)
   A government-backed scheme with a 15-year lock-in. The interest is tax-free, making it a great long-term safe option. Many Indians use PPF as part of their retirement planning.

4. National Savings Certificates (NSC)
   Issued by the post office, NSCs are small-saver friendly. They have fixed interest rates and are backed by the government.

5. Employee Provident Fund (EPF)
   For salaried employees, EPF is a compulsory saving scheme. Both employee and employer contribute, and the government guarantees the returns. Over decades, it becomes a significant retirement corpus.

6. Sovereign Gold Bonds (SGBs)
   For those who like gold but want to avoid physical storage risks, SGBs provide interest plus potential appreciation in gold prices. Backed by the Government of India, they are secure and increasingly popular.

7. Debt Mutual Funds (short-duration or liquid funds)
   While not completely risk-free, these funds invest in government securities and bonds. They offer slightly better returns than FDs and are considered relatively safe for short- to medium-term goals.

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Which Options Are Most Popular in India?

Traditionally, Fixed Deposits have been the favorite choice of Indian households, thanks to their simplicity and guaranteed returns. But over the years, PPF and EPF have also gained huge popularity, especially for retirement planning because of their tax benefits.

In recent times, Sovereign Gold Bonds have caught investors’ attention as they combine Indians’ love for gold with government-backed safety.

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The Takeaway

The slow & steady path is not about multiplying money overnight. It’s about protecting capital, earning steady returns, and building financial security over time.

If you, like Ramesh, prioritize peace of mind and predictability, this approach can help you stay consistent and stress-free in your wealth-building journey.

The 3 Ways to Grow Your Savings

 In my last post, I spoke about the simple truth of personal finance:

Income – Expenses = Savings.

That’s where everyone’s financial journey begins. But here’s the next big question: What do you do with your savings once you have them?

The way you grow those savings can completely change the direction of your financial life. And broadly, there are three ways to do it. Let me explain with a story.

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The Slow & Steady Path

Imagine Ramesh. He’s in his 40s, a schoolteacher, and he hates taking risks. For him, money is about safety. He puts his savings into Fixed Deposits (FDs), Recurring Deposits (RDs), or government bonds.

The returns aren’t huge, but they’re steady and predictable. He knows exactly what he’ll have next year and doesn’t lose sleep worrying about market crashes. For short-term goals, like paying for his daughter’s school fees or planning a family holiday, this approach works perfectly.

This is the slow, low-risk path. It’s like pedaling a bicycle—reliable, safe, and steady. You won’t get anywhere fast, but you’ll rarely fall.

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The Balanced Middle Path

Now meet Priya, a 30-year-old software engineer. She has years of earning ahead of her but also wants to build a comfortable cushion for the future. She chooses to put her money in index funds, large-cap stocks, and the National Pension System (NPS).

Her investments go up and down in the short run, but overall, they grow at a decent pace. She’s not chasing overnight success, but she also doesn’t want her money sitting idle.

This is the medium-risk path. Think of it as cruising on a highway. You’re moving faster than a bicycle, but you still have guardrails to protect you. For most working professionals, this balance between growth and safety is the sweet spot.

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The Fast but Risky Path

Then there’s Arjun, a 25-year-old entrepreneur. He loves taking bold bets. Some of his savings go into small-cap stocks, private equity, and even startups.

Some bets fail, but others bring him incredible returns. He accepts the rollercoaster ride because he knows he has time to recover if things go wrong.

This is the high-risk, fast-growth path. It’s like mountain climbing—the view from the top can be breathtaking, but the climb is not for the faint-hearted. It’s best for those who have both the appetite and the time to handle big swings.

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So, Which Path is Right for You?

The truth is, there’s no one-size-fits-all answer. The right approach depends on what stage of life you’re in and what goals you’re chasing. Younger investors may prefer taking more risk, while those nearing retirement may stick to safety. Many people combine all three approaches—shifting the balance over time as their needs evolve.

In my next post, I’ll talk about how to calculate exactly what you need to achieve your financial goals, and how these three paths fit into that bigger picture.

Rethinking Financial Growth: It's Not Just About Income and Expenses

For most people, financial planning begins and ends with a basic formula:

Savings = Income – Expenses.

This simple equation leads us to focus our energy on two main levers—maximizing our income and minimizing our expenses. Naturally, we strive to climb the career ladder, seek better-paying opportunities, and hustle for promotions or side gigs to increase income. On the other end, we try to curb unnecessary spending—cutting down on luxuries, sticking to budgets, and making cost-effective choices in our daily lives.

At first glance, this seems like the most logical approach to managing personal finances. After all, if income increases and expenses decrease, then savings should grow, right? However, over the decades, I have come to realize that this model, while intuitive, misses a crucial element. It doesn't necessarily lead to true financial growth.

The reality is that simply increasing income or reducing expenses doesn't guarantee long-term financial stability or wealth. In fact, many high-income individuals still struggle financially because their spending habits grow just as fast—or faster—than their earnings. Similarly, frugal living without a strategy for utilizing savings can lead to missed opportunities for financial advancement. Therefore, the key insight I’ve learned over the years is this: real financial growth happens when savings actually grow, not just exist as a theoretical difference between income and expenses.

Growing savings means more than just accumulating leftover cash. It involves intentional actions like investing, compounding interest, strategic asset allocation, and financial discipline. Savings must be nurtured and made to work for you. For instance, parking money in a low-interest savings account may keep your funds safe, but it does little to grow your wealth when inflation is factored in. On the other hand, investing those savings in diversified assets—stocks, mutual funds, bonds, or real estate—can generate returns that outpace inflation and build long-term financial security.

Additionally, focusing solely on income or frugality can create a false sense of progress. You might earn more or spend less, but if your savings remain stagnant or are not being effectively managed, you're not truly growing financially. Financial growth is not just about the ability to earn or save—it's about the ability to build and grow wealth over time.

This perspective shift—looking at financial health through the lens of growing savings—requires a more strategic, long-term mindset. It calls for regular review of your financial goals, consistent investment, and smart risk management. It means making your money work for you instead of just sitting passively in your bank account.

In conclusion, while income and expenses are important pieces of the financial puzzle, they are not the full picture. The real measure of financial progress lies in how effectively your savings are growing. Financial growth is not just what you earn or what you save—it's what you build with what you save.

The holy trinity - assets, liabilities and cash flow

As we start earning, investing and growing in our lives, we tend to build a portfolio of assets & liabilities. Many times the difference between assets, liabilities and cash flow tends to get blurred. In this post, I try to explain the difference between the three. 

• Lets take the easy one first - cash flow. Money coming into your account is incoming money & money going out is outgoing money. Together it forms a bi-directional cash flow. It doesn't take a genius to figure that out 😃. The problem comes when you get incoming money with strings attached, that over time ensure that the you end up spending more than what you really received. A classic example of that is personal loan. For example, if you take a personal loan on Rs. 1 Lac at 11% rate to be given back as EMIs spread over a year, then you will end up paying at least Rs. 11,000 extra - assuming no processing fee, on-time payment, etc. In such situations, what you did with that principal will determine whether this was a good cash flow or a bad one. 

• Assets : Assets are instruments that appreciate in value (or at least match inflation) AND give a steady incoming cash flow. An example of such an asset is stocks like ITC, TCS, L&T, etc whose value steadily appreciate and also give a good quarterly dividend (incoming cash flow). Real estate in a growing city (completed houses that are given out on rent) is another example. Here the value of the property tends to beat inflation in appreciation and also gives a steady monthly rental revenue. Once an investor has 2-3 such types of assets (good stocks, house, etc) then the dilemma of where to invest available money comes - meaning, which asset gives a better return over time. 

• Liabilities : Liabilities are instruments that depreciate in value (at least due to inflation) and have a steady outgo of cash flow. A classic example of a liability is a vehicle (scooter, car, etc). The value starts depreciating the minute you drive it out of the showroom and you spend every month on the vehicle (maintenance, petrol, etc). Many times we tend to take on liabilities as it gives us material comfort - it "makes our life easy". 

Other than these, there are a whole category of instruments that shift between an asset & liability depending on markets - i.e. external forces not in your control. Gold is one such asset. Stocks that give a steady dividend but whose stock price keeps fluctuating is another such instrument. So, the next time you examine your portfolio, take a good hard look at what really are your assets, what are your liabilities and what fluctuate. 

How profits are made

We tend to buy a stock, mutual fund, house, etc. at at time when we have sufficient cash and then we wait patiently for the asset's value to grow. We wait for the value of the underlying asset to appreciate so that we can sell at the right price and make a tidy profit. There is a lot of literature that talks about the virtues of being patient while investing and how money "compounds" over time. However, many of us don't realize that profits are decided when we buy, not when we sell. 

Profits are made when you invest in a really down market. When everything is so beaten down & low that you get to "choose" what to buy and at a "price that is unbelievably good" compared to what it should actually be. So keep some cash in a FD, as an investable money, and use it when the bears run the market - not when you see euphoria and new record highs. Your patience should not only be in staying invested, but, also in waiting for the trough to come when you can buy.

The three types of income

Over the last decade & half of earning, saving and investing, I have realized that any working professional tends to have three types of incomes. Each of these incomes have a different growth & risk potential and depending on the professional's age and risk taking capacity, they contribute differently to the professional's portfolio.

• Earning income : This is the income that we earn by working - i.e as a compensation for the skills that we learn & implement for someone else. The earning income mostly tends to grow proportionate to the circumstances - growth of the industry, growth of the company, promotion, etc and of course based on the individual's own ability to excel in these circumstances. For professionals working in normal growth companies, the growth in earning income is generally inflation + X %. X being dependent on how fast the company is growing. X tends to increase (one-time) when the person gets promoted, shifts a job, takes up a new role, etc. The greatest advantage of earning income is that it gives a steadiness to the cash flow. Unless you do an epic screw-up, you know exactly what will be your incoming salary for at least 12 months, if not the next 3-4 years. That helps you plan your savings, expenses, investments, holidays, etc. Of course the disadvantage of this income is that its growth is capped at a certain level commensurate to how the industry & company is growing. Both the industry AND the company have to grow, else your salary growth is sub-optimal. At the early stages of an individual's career, earning this income consumes maximum time & effort and less time is spent on other types of income. 

• Portfolio income: As the individual starts growing in his career, his thoughts veer towards "additional sources of revenue". He wants to de-risk himself and be less dependent on circumstances (growth of industry, company, etc) to grow his own wealth. He also realizes that his savings tend to lie in the bank or FD giving sub-optimal returns and he starts looking at other options of investments. This leads him to explore ways of using his existing money (savings) to create more money. The portfolio income starts kicking-in when he starts using his money to make more money instead of using professional skills (as in a job). The most common portfolio income avenues in India are mutual funds, stocks and then the more exotic ones like derivatives. The advantage of portfolio income is that it de-leverages the individual from what is happening in his industry & company. It lets him tap into larger growth waves in different industries and to ride that wave to make money. It also brings a non-linearity to growth as he can seek growing stocks/mutual funds/etc instead of waiting for his industry to grow. The major disadvantage with portfolio income is that there is a steep learning curve before you start making serious money. So, it is time consuming and many times in tends to become a gamble rather than a planned investment. 

• Passive income: This income comes into play once the individual has worked for a few years and starts looking at acquiring "assets". Assets normally have a large upfront investment amount (Capex) and a steady revenue stream (monthly/quarterly/yearly incoming cash flow) while the value of the asset itself grows. Such assets could be investing in start-ups, investing in land/houses, etc. There has been a lot of debate in India whether houses are an asset with good returns or whether one should stay away from it - I will hold my comments on it for a subsequent post. The greatest advantage of the passive income is that it doesn't consume your time & effort after the initial investment. Still it keeps giving you a steady revenue AND the value of the underlying asset itself also keeps going up. The flip side to such investments is that they are illiquid in nature - meaning, it is much easier to sell a mutual fund as compared to a house or an investment in a company. 

Depending on an individual's financial maturity and aggression for growth these three types of incomes kick-in at different stages of his life. Once all the three start kicking-in, then, managing the portfolio for optimum growth becomes the next focus area.