Top 5 Alternative Investment Options In India

It goes without saying that when it comes to money, everyone looks for growth. This growth is the key to unlocking your future goals and aspirations. When it comes to financial growth, investors are constantly seeking new opportunities to invest in alternative assets. While traditional low-risk options remain a staple in most portfolios, there's a growing interest in alternative investments that offer potentially higher yields.

So, what exactly are alternative investments? 

Alternative investments are relatively new types of assets, unlike the traditional options in the financial markets, namely stocks, bonds, and even mutual funds. Alternative investments are lower in market-related risk and have grown in popularity among a diverse group of investors.

Alternative investing was formerly popular exclusively with extremely wealthy individuals and institutional bodies. However, a growing number of people and retail investors are gradually shifting to alternative investments.

It should be noted that, unlike other traditional investment options, the rate of return of alternative investment options is not guaranteed and fixed. However, the eventual return is significantly higher in number than traditional forms of investment. For example, High yield bonds have the potential to give a return of 10-12%.

In most public assets, an investor is essentially buying paper wealth or the discounted value of what he expects to earn in the future. This translates to a simple fact: they do not own the property; however, when alternative investments, such as commercial real estate, are involved, they own the property the day they put their money into it.

5 Best Alternative Investment Options in India

There are quite a few attractive alternative investment options in India of varying ticket sizes. These include:

1. Leasing Assets

Lease investing offers a unique opportunity for investors to generate a steady income through a straightforward contractual arrangement. In this model, the investor (lessor) purchases an asset and leases it to a business (lessee) in exchange for regular payments. 

Equipment related to construction, vehicles, and furniture are some of the most often leased items. Investment in leases enables you to purchase an asset (such as furniture, electronics, or vehicles) and lease it to a business in exchange for defined monthly returns.

This investment strategy provides mutual benefits. Businesses can scale up quickly by accessing necessary assets without large capital outlays. Meanwhile, investors enjoy a stream of predictable income shielded from market volatility. With a modest entry point of INR 20,000, lease investing becomes accessible to a wider range of individuals looking to diversify their portfolios.

Also, it is important to note that amongst the many benefits of leasing, fractional ownership of the asset leased is of primary importance. This allows investors to participate in larger deals and spread their risk across multiple assets, even with a small ticket size. By doing so, investors can enhance their portfolio diversification while maintaining a manageable investment amount.

Let us understand this through an example:

A fleet company wishes to add 100 new cars to its fleet every month. Instead of buying these cars outright, they can work with Grip to lease them and commit to paying a fixed rental or lease amount every month.

This would allow investors to lease their existing unused cars and generate a steady source of income from them. They can get a proportionate share of return on such leases. Investors can earn a fixed monthly return (making this a great source of passive investment options) through this alternative investment mode. The risk on such investment is very low, and the returns are not associated with market ups and downs.

2. Inventory Financing

Inventory financing is an innovative passive investment option that benefits both companies and individual investors. This alternative investment strategy involves crowdfunding to support businesses in managing their inventory needs. Companies often require substantial capital to maintain raw materials and finished goods, which can strain their resources. By leveraging inventory financing, these businesses can remain asset-light while scaling operations.

As an individual investor, you have the opportunity to lend money directly to companies for their inventory purchases, earning interest in return.

For example, Neeman's, an eco-friendly footwear company, invites investors to provide inventory finance for procuring raw materials for their business. Investors will finance through Grip. Neeman's uses these funds to speed up manufacturing and increase stock. Investors like you and me can earn proportionate returns from Neeman's. The maturity period for this deal is 3 months, and you can earn a pre-tax IRR of 11.6%. 

Investments in alternative assets, such as inventory financing, boast numerous benefits associated with it. It diversifies your portfolio while also giving the investors an opportunity to contribute to the growth of innovative businesses actively. With alternate currents shaking up the world of management in alternative investments, options such as inventory financing are highly in demand.

3. Real Estate Investment Trusts

Investment in commercial real estate has emerged as one of the most high-profile alternative investment options available to Indian investors. Fractional ownership has revolutionised commercial real estate investment and made it accessible to a larger category of diversified investors.

Fractional real estate ownership offers an opportunity in which like-minded people pool resources together in forming investments in commercial properties through shared partial stakes. This innovative approach to alternative investments breaks down the traditionally high entry barriers, enabling investors to participate with smaller capital outlays. 

This surge in popularity can be attributed to several attractive features: 

1. Higher rental yields compared to residential properties
2. Long-term leases with established multinational tenants
3. Extended lock-in periods, ensuring stable income streams
4. Strong credit backing, minimising default risks 

As investors explore alternatives to traditional investment vehicles, commercial real estate fractional ownership stands out as a compelling option. It offers a unique blend of passive income potential, asset appreciation, and risk mitigation through diversification.

4. Startup Equity

One of the most lucrative alternative investment options in India is investing in startup equity and becoming a Venture Capitalist. By providing startup capital or small business finance in exchange for stock, you can become a venture capitalist. 

This alternative investment strategy typically requires more substantial capital compared to other options like P2P lending or real estate. However, the potential rewards can be substantial. As an equity holder, you may benefit from:

1. Regular dividend payments
2. Royalty income streams
3. Potential for substantial buyouts during future company sales

It's crucial to note that investing in startup equity as an alternative investment carries considerable risks. Your investment's success is intricately tied to the performance of the chosen startup. While some ventures may yield exceptional returns, others might falter, potentially leading to significant losses. 

5. Corporate Bonds

Corporate bonds have emerged as an attractive alternative investment option for those seeking steady returns with moderate risk. These financial instruments allow companies to borrow directly from investors, providing capital for various corporate objectives such as launching new projects, expanding operations, or meeting working capital needs.

As an investor in corporate bonds, you essentially become a lender to the issuing company. In return for your investment, you receive a legally binding commitment from the company to pay regular interest and repay the principal amount upon maturity. This structure offers a predictable income stream, making corporate bonds a popular choice among alternative investment funds.

One of the key advantages of corporate bonds as an alternative investment is their potential to offer higher returns compared to traditional fixed deposits and other fixed-income securities, making them a very appealing option. 

Conclusion

Diversifying your investment portfolio with alternative investment options like corporate bonds can help maintain a steady growth trajectory. Even if one investment underperforms, others can help balance overall returns. If you are guided by an alternative investment management platform performing due diligence on the companies they host, then investment becomes safer. Consider exploring these alternative investment opportunities to potentially boost your wealth growth through platforms like Grip.

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Disclaimer: This communication does not constitute advice relating to investing or otherwise dealing in securities and is not an offer or solicitation for the purchase or sale of any securities. Grip Invest Technologies Private Limited ("Grip") is not registered with SEBI in any capacity and does not advise, encourage, or discourage its users to invest or not invest in any securities. Grip is solely an execution-only platform and does not guarantee or assure any return on investments made by you in any opportunities sourced by Grip and accepts no liability for consequences of any actions taken based on the information provided. Your investment is solely based on your judgement. Investments in debt securities are subject to risks. Read all the offer related documents carefully.