• Here are few possibilities for High-Networth Individuals (HNIs) to plan for credible investments over the long-term

In present times, we have to contend with the problem of plenty. There is a myriad of options available for investors and it has become exceedingly difficult to narrow it down further that will work for a specific person or group especially for an investor with a surplus above 2 crores which are considered as High Networth Individuals in India.

Given this conundrum, here are few possibilities to make it effective and effortless for High-Networth Individuals (HNIs) to plan for credible investments over the long-term.

Equities & Fixed Income:

This does sound like an investment option that is too simple and obvious. Sometimes, it is the most basic strategy that have the potential to multiply and create substantial wealth. Equities and debt asset class can be leveraged efficiently to protect capital while generating significant returns.

PMS to generate alpha & ETF to generate beta:

Equities are not relegated solely to direct stock investing. The right permutation and combination of stocks and equity market instruments can aid in generating better returns and provide some extent of capital protection.

PMS being one such avenue of investing comes with multiple benefits such as owning a quality portfolio, transparent fee structure, customized and separate portfolio where investors can invest according to one’s risk appetite with the help of a Portfolio Manager. Registering with a Portfolio Management Service (PMS) may aid in creating alpha by keeping a skilled and experienced professional at the helm with the sole aim of generating great returns.

Complementarily, investing in market-related instruments like ETFs which track the index can provide a ceiling to volatility that is inherent to stock markets. Flexibility in trading, no maturity period and liquidity are such favourable points which makes it a cost-effective investment avenue for HNI.

Fixed Income or structured debt instruments:

Preservation of capital is as important as growing wealth. Debt instruments such as government and corporate bonds, Certificate of Deposits (CDs), money market funds and so on are focused on preservation of capital and income. It helps in overall portfolio diversification by offsetting risk of losses due to equity market fluctuations. Frequently, it is observed that stock and bond prices move distinctly and hence the correlation is low. HNIs can invest in debt instruments to protect their portfolio’s downside risk.

Likewise, Investment in structured products as opposed to plain vanilla options can provide the relative stability of debt while delivering potentially higher returns. Structured products are constructed to suit investor’s risk and goals which invests in assets like bonds, equities, currency or Interest, ETF, Index, and derivatives.

Fixed Assets like Real Estate:

Investment in physical, tangible assets like real estate were always an HNI favourite. They should continue to be a part of one’s overall portfolio for long-term wealth creation. By investing in REIT, one is not only creating an asset that will grow over time, but it also has the potential to give a consistent cash flow in the form of rental yields.

The interpretation of owning fixed assets like real estate has certainly changed in today’s age with instruments like Real-estate Investment Trusts (REITs) and fractal ownership in premium properties slowly gaining ground.

Alternates like Gold, Unlisted equity, and others:

Apart from the ones mentioned above, HNIs have many other non-conventional investment options they can explore- such as investment in gold, unlisted equity, alternative investment funds (AIFs), venture capital, private equity, etc. Investment in alternative asset class helps in a diversification of the portfolio due to low correlation with traditional asset classes.

Each of the above asset classes holds a unique quality or aspect that can be leveraged, to enhance the viability of the overall portfolio and garner better risk adjusted returns for the long term.

Mrinal Singh is the CIO and CEO of InCred AMC

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