Unconventional Investing Options Explored
Namaskar doston. Angel One ke iss podcast mein aapka swagat hai. Welcome back, to our loyal listeners and followers and welcome aboard to all our first time listeners.
Agar aap pehle baar humare podcast sun rahe ho toh this is where you can get stock market concepts, decoded confusing stock market news and a whole lot of stock market jargon explained and simplified.
Sirf yeh nahi, mera promise yeh hai ki mai aapko bore nahi karunga - lighthearted, fun aur simple tareeke se explain karunga.
Aaj ka topic hai unusual investment options maane ve investments Jin ke bare mein log either jaante nahi hai ya toh they are aware of them but not clear on how they work and what their benefits are.
Vaise hai dher saare out of the box options options lekin aaj hum discuss karenge a few options that adhere to 3 criteria
They should fall in the typically invested asset classes - fixed income, real estate, stock market and stock market linked.
Inke substantial historical data rehna chahiye, not necessarily in india lekin this investment option should have existed for at least 25 years. Mai aapko zyaada risky rasta nahi dikhana chahta hu iss podcast mein.
The investment option should be accessible to the aam Aadmi jaise ki mai, aur aap… Jinke paas karodo rupaye nahi rehte hai. So we’re not going to talk about private equity etc either. Mai aap ko darana nahi chahta by making you think your capital is too small. No amount of capital is ever too small - you just need to identify the correct investment options.
Toh yeh tha mera selection criteria jiske basis maine 4 asset classes ke liye 4 investment options shortlist kiya hai
Fixed income mein discuss karenge FDs in small finance banks
Real estate mein dekha jayega REITs
Stock market mein we will look at tax saving bonds
Stock market linked mein we will discuss a slightly less common type of mutual funds, namely opportunity funds
Fixed deposits in small finance banks
Small finance banks are typically looking to make a name for themselves in the market. Many of them might be new aur competition ko beat karne ke liye ve customers ko more competitive rates of interest bhi de rahe hai, personalised service bhi de rahe hai aur short term investment tenures bhi de rahe hai.
Small finance bank filhal 5-6% hi nahi balki up to 10% interest bhi offer kar rahe hai depending on the amount of the investment and the tenure. Zyaada tal to be eligible for 10% interest, you might have to invest about Rs 1 lakh for a period of 1 year or 2 years, lekin yeh interest paane ke liye many investors are willing to tie down a good chunk of their capital.
Logon ko misconception hai that small finance banks are risky but they are categorised as scheduled banks and governed by the same laws and answerable to the RBI, kisi bhi dusre bank ke tarah .
Pros and cons:
Pros hai high rate of interest, personalised service, shorter lock-in period for average rates of interest
Con sirf ek hai that is longer lock-in period for higher rates of interest
Real Estate Investment Trust investments india mein thoda new hai lekin globally, 1970s se chalu hai. Iss tarah ke investment mein investor capital pool kiya jata hai aur REIT ka fund manager woh paise ko khaas real estate projects mein invest kar lete hai.
In other words, you are investing in the real estate sector but instead of putting down lakhs and lakhs to buy one house, you can put down a few thousands and get exposure to a variety of real estate projects. Risk kam hota hai than investing in one project where the rate may or may not rise. Iske upar aapko har saal 2 baar 2.5% mil hi jata hai jo sarkar ne compulsory bana diya hai.
Pros and cons
Pros hai diversified exposure aur woh bhi indirect exposure (aap khud select nahi kar rahe ho; a professional chooses the projects for you).
Cons hai stock market risk. REITs are traded on the stock market
Tax saving bonds
Yeh woh investors ke liye relevant hai jin ke zyaada long term capital gains rehte hai. Long term capital gains are the earnings made on long term stock market or stock market linked investments. Toh aapke stocks ya bonds ya mutual funds ya REITs pe jo earnings milta hai when you invest for more than 1 year, yeh earnings taxable rehte hai. Woh tax kam karne ke liye aap tax saving bonds mein invest kar sakte ho. Bonds ka funda hai ki aap creditor ban jate ho aur bond-issuing company jo hai woh debtor ban jata hai. They commit to paying you back your capital with interest by a certain date.
Pros and cons
Pro hai safer than stocks and tax saving
Con hai credit default risk. The bond issuer could end up in some trouble and not pay.
Keep in mind ke tax saving bonds aur tax free bonds alag cheezein rehte hai...tax free bonds are usually available at the financial year end; in ke 7 years lock in rehta hai aur bilkul tax free rehta hai, you don’t need to pay any TDS. Vaise yeh bhi sahi option ho sakta hai so it looks like 4 ke badle mai aapko 5 investment options de raha hu. Pros and cons are the same as tax saving bonds.
Opportunity funds dusre mutual funds ke jaise hi hai in the sense that aap units khareedh lete ho aur aapka capital dusre investors ke capital ke saath pool ho ke stock market mein invest kiya jata hai. Difference yeh hai ki most mutual funds are quite restricted - certain amount of diversification chahiye hi chahiye to keep the risk low; certain debt to equity ratio chahiye hi chahiye because it has been committed so to unit holders; kai mutual funds specifically large cap ya mid cap ya small cap mein invest karte hai (though now there are multicap funds as well).
Oh wait - thoda translation du? Debt refers to bonds, equity refers to stocks and cap is short for market capitalization which is the rupee amount held by public shareholders (not owners).
Opportunity funds mein yeh sab rules nahi hai. The fund manager’s only directive is to chase opportunities that display potential for growth.
Pros and cons
Pro hai potentially high returns
Con hai high risk
Dost yeh investments aapke consideration ke liye hai. Before investing, always read the paperwork and check the track record of the bank or fund house or REIT or the company issuing the bond. Aur haan, hamesha apna risk appetite theek se samajhna.
Jaane se pehle ek auur important baat. This podcast has been made for educational purposes only and the investor must do his own research as well.
Aise aur interesting podcasts sunne ke liye humein follow karein via youtube and other social media channels. Until then goodbye and happy investing!
Investments in the securities markets are subject to market risks, read all the related documents carefully before investing.