A portfolio with a right mix of stocks and bonds may not be enough to achieve your long-term goals. As an intelligent investor, it’s important to know why alternative investments can offer new opportunities. That’s because exploring investment options beyond the primary assets can spice up the returns column and diversify your investments further. So, here are a few reasons why you can opt to invest a part of your money in alternative investments.
✓ Lowers volatility: Traditional assets like bonds and stocks show strong correlation with economic trends that answers why alternative investments make sense. Market risk for such traditional investments cannot be eliminated completely even after diversification across various sectors, avenues and geographies. In that regard, alternative investments depend less on big market trends due to its illiquid nature. Hence, knowing why invest in alternative investments can reduce the effect of market volatility.
Let’s consider why use alternative investments such as private equity to understand this better. Since you are investing in companies that are not listed and traded publicly, your investment is not directly affected by stock market volatility.
✓ Higher return potential: The goal of alternative investments is to generate higher returns. Unlike traditional investments, there is no competition against a benchmark. Furthermore, since these investments involve moderate-to-high risk, they have a potential to deliver high returns. This is why it is a good idea to know why alternative investments in market can be a good choice in one’s portfolio.
For example, venture capital funds invest in start-ups having high potential for growth. If the start-up starts growing, you can receive massive returns. Similarly, hedge funds can deliver higher returns with reduced risk by trading various strategies across different asset classes – commodities, currencies, equities, debts and derivatives (futures and options, forwards, swaps etc).
✓ Widens Portfolio Diversification: There is a wide range of products in alternative investment space. Investing in them can diversify your investments further. After all, a well-diversified portfolio can deliver better returns to achieve long-term goals. Hence, it makes good reason to know why use alternative investments in stocks as part of your portfolio.
✓ Tax benefits: Since most of the alternative investments are for the long-term, they can provide you certain tax benefits. Private equity and venture capital funds can help you avoid long-term capital gain tax as they invest in unlisted companies. However, it would be erroneous to suggest these investments provide 100% tax breaks. All these options do have certain tax obligations.
To sum up
Alternative investments can diversify your portfolio and provide you refuge from the volatility of stocks. So, if you have a sizeable kitty to invest and the patience to reap reward in the long run, putting it in an alternative investment can be an ideal choice.
The world of alternative investments could also include more confined and niche sectors such as collectibles, fine art and other rarities. These non-conventional investments can play an exceptionally crucial role when conventional investments undergo substantial unpredictability. You may want to consider such options as a potent diversifier along with traditional investments.
To know how to best understand alternate investments and make the right decision call, you may want to look into the services of a financial advisor. Investments experts employ progressive and established strategies that can help you to capture opportunities in the various sectors of alternative investments.
Disclaimer: Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.
Myths about investing in mutual funds
There’s a popular adage that goes like this: A little knowledge is a dangerous thing. That’s true because you are bound to trip at some point if you don’t have the right information on you. It’s no different in the world of investing either. And like with every aspect in life, misconceptions do weave itself into a popular narrative. This article will act as a Good Samaritan and help bust myths on mutual funds investment that have inevitably become a part of mutual funds’ success story.Myth 1. Mutual fund investments require lot of moneyReality: The reality is that there are a variety of mutual fund investment types. Most of them can be started with as low as Rs. 500 through the systematic investment plan (SIP) route. SIPs allow you to invest a certain amount of money on a monthly basis in most mutual fund investment options. This way, you don’t have to invest a lump sum amount in one go.Myth 2. Mutual funds with lower NAV are always betterReality: A mutual fund’s return-generating capacity depends on its underlying assets, past performance, fund management quality and future prospects. Contrary to popular mutual fund investment myths, the size of the net asset value (NAV) has nothing to do with its future performance.Myth 3. You need to be an expert to invest in mutual fundsReality: This is one of the myths about investing in mutual funds; however, it is partially true. You do have to research which mutual fund suits you the best. But once you have selected your kindred fund, leave the rest to the fund manager. You don’t have to be a savant, a consummate number-cruncher to strike gold. That’s because the fund manager, along with a team of analysts, put in their skill and expertise to manage your money. All said and done, it is still advisable to keep monitoring your investment’s performance from time to time. Myth 4. Investing in high-rated funds can deliver better returnsReality: A fund that has done well in the past may not necessary do well in future. You need to remember that you are playing the market, and that markets are dynamic and ever-changing. Therefore, performances of funds are fluid too. The list of high-rated funds keep evolving. It is very difficult for a fund to keep delivering high returns year on year. So, even though you should look at the fund’s past performance to gauge its strength, it is not gospel either. It cannot guarantee you high returns in future. Myth 5. Investing in debt funds is risk-freeReality: Debt funds invest in fixed income securities like bonds, government securities and other debt instruments. Though risk is on the lower side, performance of such funds can vary due changing interest rates and credit risk.Myth 6. Mutual funds are for long-term investors onlyReality: Many investors believe there is no scope for short-term income in mutual fund investments. While it’s true that for higher returns you need to stay invested for longer, there is an opportunity for short-term investors too. That’s because there are many types of mutual funds. For instance, there are liquid funds, ultra-short-term funds and short-term funds that can offer decent returns over a shorter time frame.To sum up, it is important to weed out the fake news associated with mutual funds. Even though we are currently living in a post-truth era, the world of finance is still very well ensconced in the world of facts and numbers. Bending them to your advantage can backfire in the long run. Instead, let myths play truant in the minds of those living in an altered reality. Disclaimer: Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.
All About Real Estate Investing
Did you know that the real estate market is expected to grow at 30% in the next ten years? That’s what the Indian Brand Equity Foundation (IBEF) suggests. Also, India is ranked ninth in the Global House Price Index with regards to real estate investing. These reports showcase the country’s real estate prowess. Even though this sector does go through cyclical peaks and troughs, Indian investors have largely relied on properties to fetch them high returns in the long run. So, why should you be in the dark about property investment? As a guide to real estate investing for beginners let’s look at some of the avenues that can help you as well: ✓ Plots: Investing in plots can be a decent and smart real estate investing for investors looking for capital appreciation. However, it’s vital to choose the location carefully as part of real estate investing. For instance, investing in a piece of land in a developing locality can be a good start. You can also give the land on lease for agricultural use or construct a commercial building on it. ✓ Residential properties: Houses and apartments are considered as residential properties. You can earn a steady income by letting them out for people to reside in on rent or lease. As the value increases, it offers you capital appreciation over the long-term. However, there is a vacancy risk associated to it. You may suffer losses if your house is not on rent for some time. ✓ Commercial properties: Basically, it refers to investing in buildings that are exclusively used for business activities. Investing in commercial properties can provide you both a regular income and capital appreciation over the long-term. ✓ Industrial properties: Warehouses, factories and distribution centres’ are a few examples. The key benefit of investing in industrial properties is that it can yield you a higher income with longer leases. Also, these properties are usually low-maintenance because most of the industrial tenants takes care of this part. However, the risk is high as they are more expensive and also vulnerable to economic conditions. Investor need to be prepared for long-term vacancies and higher loan rates. ✓ Real estate investment trust (REIT) funds: REITs gives you an opportunity to make securitised real estate investments. This fund invests ‘pooled money’ from various investors in completed real estate projects. This means that investing in REITs can help you invest in properties in smaller amounts. The income generated from fund investments are majorly distributed in the form of dividend to investors. REIT funds also offer easy and quick liquidation of investment. As they are regulated by SEBI, there is a fair degree transparency in the investment. To sum up, in a developing country like India, there is always more focus on infrastructure development. Considering the scope of growth over the long-term, real estate investments can be a good option to invest in. Now that we know how to start investing in real estate, it is also important to consider regulatory reforms and the interest rates before you invest in a property or REIT funds. Purchasing real estate is more than just locating a spot and making it one's place of residence. Almost every individual maybe called to conduct a real estate transaction at some point in their lives. The process of real estate investing can be an intriguing opportunity for some, while others find value in the capture and creation of a sale. Since, investing in real estate has become a common investment vehicle; it makes sense to know all about it. The above mentioned pointers can be your helpful guide in making the right decisions with regards to real estate investments. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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