{"id":908061,"date":"2026-09-28T02:38:08","date_gmt":"2026-09-28T02:38:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/908061\/"},"modified":"2026-09-28T02:38:08","modified_gmt":"2026-09-28T02:38:08","slug":"can-we-build-generational-wealth-with-mutual-funds","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/908061\/","title":{"rendered":"Can we build generational wealth with mutual funds?"},"content":{"rendered":"

Can we build generational wealth with mutual funds? Ms Sonia Shenoy asked me this interesting question in a podcast<\/a>. My answer was that it would be extremely hard. Let me expand on my answer in this article.<\/p>\n

To build generational wealth, returns from an asset class alone are not enough. Each generation must earn more than the previous generation. This is not easily possible if grandmother, mother and daughter are all salaried. Hard work and prudent investing will ensure inflation does not erode the lifestyle of a family.<\/p>\n

But that is not enough for generational wealth. Let us consider an example. Say a grandmother attains financial independence in her 50s. She has enough money for a 40-year comfortable retirement. She leaves a small inheritance for her daughter. She builds on that and, in her 50s, has enough wealth for the entire family to comfortably live the next 50 years.\u00a0The daughter\u2019s daughter builds on this and accumulates enough wealth that will last the family the next 75 years and so on.<\/p>\n

It would be incredibly hard to do this if they were working for a salary. After adjusting for inflation, each subsequent generation\u2019s salary should be at least slightly higher than that of the previous generation. Sustaining this over time would be quite hard.<\/p>\n

Typically, generational wealth needs enterprise and matching DNA! By matching DNA, I mean the progeny should be willing to head the enterprise. If they rebel and want to forge their own path, lifestyle across generations can dip.<\/p>\n

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Naturally, even with co-operative progeny running a business over 3-4 decades is no walk in the park either. Salaried or enterprise, that is why it is so hard to achieve.<\/p>\n

While mutual funds can be used as an investment tool for building and preserving wealth,\u00a0 the key is income and how it grows from one generation to the next.<\/p>\n

I realised this the hard way. As I mentioned in the podcast,\u00a0 my great-grandfather probably led an upper-middle-class (or better) life in the 1940s and \u201950s, but later on, my family\u2019s social station gradually slipped and has remained firmly rooted in the middle class since the 1970s.<\/p>\n

In the late eighties, we had to sell our huge bungalow in the heart of Mylapore in Chennai to relocate to flats. The emotional scar of that move affected my father (who was born in that house) quite a bit, and I cannot get over it to this day.<\/p>\n

That is when I realised that one generation should earn more than the previous generation to try and hold on to what was bequeathed to us.<\/p>\n

It is only because of my parents\u2019 sacrifices that I spent 12 years after school educating myself, qualifying myself, and increasing my earning potential. See, our financial independence today is because of our parents\u2019 sweat and toil<\/a>. And\u00a0O Captain! My Captain!<\/a><\/p>\n

When my father insisted on marrying an employed woman, and my parents decided to have only one child, the seeds of financial recovery were sown. That may not sound politically correct to many today, but it was\/is practical.<\/p>\n

They then allowed me to study nearly 14 years after school without pressure. This allowed me to obtain a PhD, experience and, as luck would have it, employment at IIT, Madras. This is the only reason I reached the threshold of financial independence after 10-12 years. See My Journey: driven by the fear of making the same mistakes again<\/a> And, 15 years of mutual fund investing: My Journey and lessons learned<\/a>.<\/p>\n

Due to my father\u2019s untimely demise, I was forced to learn money management and appreciate equity investing. Because of this, my family has moved back\u00a0up the social ladder.<\/p>\n

Building generational wealth on salaries is extremely hard, if not impossible. Yes, mutual funds can help the cause, but the fuel is income and the rate at which it grows over time.<\/p>\n

Do share this article with your friends using the buttons below.<\/p>\n","protected":false},"excerpt":{"rendered":"Can we build generational wealth with mutual funds? Ms Sonia Shenoy asked me this interesting question in a…\n","protected":false},"author":2,"featured_media":908062,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,186,184,185],"class_list":["post-908061","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-au","tag-australia","tag-business","tag-finance","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/908061","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=908061"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/908061\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/908062"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=908061"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=908061"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=908061"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}