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Stocks are a good investment option, but there are some shortcomings too, such as their volatile nature and market downturns.
“Earnings revision, though still better than long-term trends, have moderated from upward revision trends and now are flattish since July,” said Surendra Goyal, head of India research at Citi. “
Source: CNBC
The average inflation rate in India has been more than 6% in the last 10 years, and hence we need to find out the alternative for stocks. Here comes Alternative Investments, which would help us diversify our portfolio, more promising returns, and be a good option to park our money into.
Now let’s discuss alternative investment vehicles (AIVs) that will address our need-of-the-hour problem.
Real Estate:
It’s like owning a piece of the world! Real estate can be:
• Residential: houses or apartments
• Commercial: shops or office spaces
• REITs (Real Estate Investment Trusts): investing in the shares of a cumulative fund, collected from retail investors in order to return dividends to them.
Alternative Investment Funds (AIFs): They’re like piggy banks where money is collected from sophisticated investors (usually) to invest in different avenues.
They come in three types:
Category 1:
• Venture Capital Funds: It’s like investing by betting on the next big business.
• Angel Funds: Supporting even newer, smaller startups
• Social Venture Funds: investing in businesses for the betterment of the world.
• Infrastructure Funds: funding big projects like roads and power plants.
Category 2: They grow steadily but returns are enormous.
• Private Equity Funds: buying major stakes in companies and then helping them grow further.
• Debt funds: lending money to businesses and earning interest.
• Fund of Funds: A fund that invests in other funds, which can lead to an increase in the cost of investing for investors but also increases trust.
Category 3:
• Hedge funds: using complex and unusual strategies to try and make money in any and every market possible.
Why consider these alternatives?
1. Diversification: spreading risk by investing in different alternatives.
2. Potential for Higher Returns: Aiming to beat the market returns.
3. Positive Impact: Some investments focus on social responsibility.
4. Tangible Assets: In the case of real estate, you’re investing in something physical that you can touch and feel.
But remember, with potentially higher rewards comes higher risk.
While you might not be ready to jump into these investments just yet, it’s great to know what’s out there to invest in. Keep saving and start learning to grow those savings.
Remember, the key to financial success is to keep learning and growing. Your future self will thank you for starting early.
Thank you.
Regards,
Kautilya, IBS Mumbai.
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