Imagine having a meal in your favourite restaurant. You start with appetizers, then go to the main course and end the meal with some wonderful dessert. I know you may be getting hungry right now but let me interrupt your thought with something more interesting. Now think of your investment portfolio as this meal. The appetizers are like investing in Equities, your main course akin to investing in Mutual Funds and think of your dessert as “Alternate Assets”. Like every good meal, every portfolio deserves a dessert.
Let me now take this opportunity to talk a bit more about Alternate assets.
Before getting deeper into Alternate assets, let’s first understand the landscape of all the investment instruments available for us to invest into.
What are Alternate Investments different from Traditional Investments?
Very simply, alternate assets comprise of assets that are not a part of Traditional financial assets (Fixed deposits, Equity shares, Equity and Debt Mutual Funds) nor Traditional Physical Assets (Real Estate, Physical Gold).
How are Alternate Investments different from Traditional Investments?
In their basic nature, alternate investments form part of some asset class i.e. they mainly fall under either Debt, Equity or Real Estate. There are a few other asset classes but they are very niche (like paintings) and hence not relevant to our discussion here. I have also excluded crypto assets from our discussion due to the debate and controversy surrounding this asset class.
Classification of Alternate Assets
Till recently, only Ultra HNI’s and big institutions had access to investing in these assets. But the rise of technology has now made these instruments accessible to all investors due to smaller ticket size offerings.
Why should you invest in Alternate Assets?
Higher Returns
Alternate investments have the potential to give an extra kick to your returns. Of course, that extra return comes at some risk. That’s where the curation of platforms like InCred Money comes into the picture. We offer products that are vetted by our financial experts.
Diversification
Alternate assets typically have a lower co-relation with traditional assets. For e.g. High yield bonds are not as susceptible to interest rate volatilities as traditional debt instruments. Thus, when alternate assets are added to the portfolio, they reduce the overall risk of the portfolio.
Protection against Inflation
Inflation can be a killer. Certain alternate assets, such as REITs & fractional real estate, can serve as a hedge against inflation due to their tangible nature and limited supply. Debt products like Corporate Bonds and Debentures offer a 4%-5% p.a. higher returns than Fixed Deposits helping you combat inflation.
Low Ticket Sizes
Let me explain this with an example. India’s service sector is on the rise and so is the demand for commercial real estate. Common sense would suggest that it is a good idea to invest in Commercial real estate, but as a retail investor it is almost impossible to do that. To solve this problem, there are instruments like REITs where one can start investing with sums as low as Rs. 10,000! Similarly, you can now invest in corporate bonds starting at Rs. 10,000.
Risks of investing in Alternate Assets
Of course, there are some risks attached to Alternate investments like credit risk and liquidity risk. One should note that risk types vary among different types of alternate assets.
It is important to realize that every investment that offers a return higher than the risk-free rate (~4% p.a. for India) has a risk associated with it. That’s why there’s a saying – Higher returns come with higher risk. But what is more important is how the different risks associated with an investment product are being mitigated or managed.
Selection of Alternate Assets
At InCred Money, we understand the importance of due diligence and curating opportunities that align with your investment goals.Our financial experts meticulously analyze financial statements, credit rating reports, and conduct extensiveresearch to ensure the proposals we showcase have a solid foundation. Over the past four years, we have maintained a zero-default rate across our alternate investment products, giving you the peace of mind that you deserve.
To conclude, Alternate Assets should be an essential part of your investments as they can boost returns, protect against inflation, and help diversify your overall portfolio.
Disclaimer
Investments in securities are subject to risks. Read all the offer related documents carefully.
The information contained in this article is for general, educational and awareness purposes only. Reader shall be fully liable/responsible for any decision, whether related to investment or otherwise, taken on the basis of this article and should consult his own advisors to determine the merits and risks of such investment.
* Investments under the Orowealth Brand
