PI Global Investments
Alternative Investments

Beyond Stocks and Bonds: Exploring alternative investments for portfolio growth – Money News


By Tejas Patil

The traditional approach of solely relying on savings to prepare for the future has become obsolete. In the current economic climate, diversified investments have become indispensable to secure one’s financial future. The average inflation rate of 6.01% in India over the past decade underlines the importance of investing in a range of assets to mitigate financial risks and ensure long-term stability.

The field of investment opportunities is constantly evolving, and while traditional options like bank deposits, stocks, bonds, and mutual funds have historically been favoured, their potential for returns may now be outweighed by other opportunities. As such, investors are increasingly exploring alternative investment avenues such as venture capital, private equity, real estate, and commodities. These alternative investments offer unique benefits and may provide a valuable addition to a diversified portfolio. Investors need to consider these options to ensure they are making informed decisions regarding their investments.

Delving Deeper

Alternative investments represent a diverse range of investment opportunities that extend beyond traditional avenues, such as stocks and bonds. A well-diversified portfolio includes a mix of these conventional investments and alternative investments to potentially reduce volatility and increase returns.

One of the key advantages of alternative investments is their ability to offer diversification and potentially higher returns with a positive social impact. The growth of the alternative investments market is being driven by the expanding pool of domestic capital, which has spilt over into India’s tier II and tier III towns. Therefore, alternative investments have considerable potential for investors seeking to diversify their portfolios and generate higher returns.

Also Read: Physical Gold vs Gold Mutual Funds: Which is more efficient?

The Opportunities

In the ensuing article, we will have a brief overview of the various categories of alternative investments:

Private Equity – This form of investment involves ownership of businesses that are not publicly traded while encompassing venture capital, leveraged buyouts, and growth capital. Venture capital investments are typically directed towards startups that exhibit high growth potential. Leveraged buyouts entail purchasing a controlling stake in established companies with borrowed funds, to enhance their operations and profitability. Growth capital investments target mature businesses in need of capital to expand or restructure operations, enter new markets, or finance a significant acquisition.

Hedge Funds – This investment vehicle employs a range of strategies to generate active returns for its investors. Strategies involve short-selling, derivative leverage, and investment in both domestic and international markets. While hedge funds have the potential to generate high returns, they also carry significantly higher risks and are generally less regulated than other types of investments. As a result, they are typically reserved for accredited or institutional investors who possess the financial capacity and risk tolerance necessary to withstand such risks.

Commodities – Physical commodities, such as gold, oil, and agricultural products, are tangible assets that investors can invest in directly or through futures contracts. The purchase of such commodities can be made through futures contracts, which offer the investor the option to buy or sell a commodity at a specific price on a predetermined future date.

Collectables – These are tangible assets that hold value due to their rarity or demand. Examples of such items include art, wine, classic cars, non-fungible token (NFTs) and rare coins, which have the potential to generate investment returns. However, it is important to note that the value of collectables is subject to fluctuations based on trends and personal preferences, and may be highly subjective. As such, investors should exercise caution and conduct thorough research before investing in collectables.

Real Estate – Investments in real estate have always been considered a crucial aspect of wealth creation and portfolio diversification. However, traditional real estate investment can be quite expensive, require property management responsibilities, and may pose liquidity challenges. In recent years, a new way of investing in real estate has emerged, known as fractional real estate investment. This approach provides an alternative and more accessible way for individuals to participate in the real estate market. Fractional real estate investment enables investors to own a fraction of a property, allowing them to diversify their portfolios without the need for large capital outlays. By taking part in fractional real estate investment, investors can now gain exposure to a diverse range of properties, from residential apartments to commercial spaces, thus spreading risk and minimizing the impact of market fluctuations on their overall investments.

In a Nutshell

It can be confidently asserted that alternative investments have become an essential component of investment beyond traditional savings options. Diversification of investments, as a strategy, yields higher returns and protects against inflation. However, alternative investments present their own set of risks and challenges such as illiquidity, higher volatility, and complexity.

As with any investment, it is essential to meticulously evaluate one’s risk tolerance, conduct comprehensive research, and seek expert advice before venturing into alternative investments. By comprehending the benefits, risks, and challenges associated with various investments, investors can make informed decisions and potentially augment their overall investment portfolios.

(The author is Founder, Arbour Investments)

Disclaimer: Views and facts expressed above are those of the author. They do not necessarily reflect the views of financialexpress.com. Readers are advised to consult their financial planner before making any investment.



Source link

Related posts

Regulatory landscape and supply-demand dynamics expand alternative investments opportunities to a broader range of investors

D.William

The Tide Has Turned: Global Asset Management 2023

D.William

A new way to diversify our client portfolios and funds | Insights

D.William

Leave a Comment

* By using this form you agree with the storage and handling of your data by this website.