Unlock High Return Opportunities With These Alternative Investment Strategies
Today's financial environment necessitates investment portfolio diversification to boost earnings and reduce risk. Diversifying across asset classes can boost earnings and reduce market volatility. Alternative investments attract investors seeking greater returns than FDs but more security than stocks.
Alternate investments like asset leasing, corporate bonds, Securitised Debt Instruments (SDIs) and many more appeal to investors seeking steady, low-risk income. These non-traditional assets often succeed in certain markets, offering unique growth prospects. These investment products diversify portfolios well. They help you in enjoying high-return investments with balanced risk. Reliable and innovative options enable a robust and diverse investing plan.
Understanding Alternative Investment Strategies
Alternative investments can mitigate market volatility by not correlating to the stock market. It helps investors spread risk. These instruments often generate steady income during economic downturns, even when stocks and bonds vary with market movements. This makes them enticing to investors seeking steady profits in a volatile environment.
Alternative investments, especially for asset preservation and steady return, have gained popularity amongst investors. Alternative investment methods that combine high-yield and traditional assets can diversify portfolios. This strategy maximises earnings and reduces risk. Thus, alternative investments are gaining popularity for inventive and robust financial options.
Why Consider Alternative Investments?
In an ever-changing economy, investors are seeking alternative investments for more stable returns. Inflation, interest rates and global stock market volatility favour non-traditional investing. Alternative assets are more recession-resistant than traditional investments due to low market correlations.
During economic turbulence, investors pick alternative investments such as corporate bonds, securitised financial products, and LeaseX asset leasing for favourable outcomes. Non-traditional diversification decreases stock market volatility and boosts income consistency. Alternative investments are needed for financial planning.
Types Of Alternative Investment Strategies
Diversifying a portfolio with diverse investments balances risk and returns. The following are some of the known alternative investments for stability and growth.
Type of Investment | Key Features | Benefits of Alternative Investments | Example | Key Considerations |
Corporate Bonds | Companies issue debt products to allow investors to lend and earn regular income. | - Fixed returns
- Lower risk in comparison to equities
- Tradable in secondary markets
| An investor allocates INR 60 lakhs to corporate bonds with an annual interest rate of 10%:
- Annual Interest: INR 6 lakhs
- Monthly income: INR 50,000 | - The organisation's credit rating
- Stability of interest rates
- The issuer's risk profile
|
Asset leasing | In exchange for monthly payments, investors acquire assets such as equipment, buildings, properties and more, which are subsequently leased to companies. | - Less risky than equities
- Income that is consistent and predictable | The investor invests INR 50 lakhs through LeaseX, with an annual return of 10%.
- Annual Return: INR 5 lakhs
- Monthly Income: INR 41,666
| Length of lease
- Demand and asset type
- Market value of the leased asset |
Securitised Debt Instruments | A group of financial assets, including mortgage-backed securities, sold to investors to earn revenue. | - Risk diversification
- Consistent income
- Tradeability contributes to liquidity | The investor allocates INR 46.15 lakhs to SDIs with an annual return of 13%.
- Annual Return: INR 6 lakhs
- Monthly income: INR 50,000 | - The credit rating of the underlying assets
- Market circumstances
- Options for redemption and liquidity |
Alternative Investment Funds
Alternative investment Funds (AIFs) combine assets from skilled investors to invest in private equity, venture capital, hedge funds and real estate. Securities and Exchange Board of India (SEBI)-regulated AIFs give accredited investors access to high-growth industries that regular investors cannot.
Category | Description | Investment Focus |
Category I AIFs | Investment funds that support humanitarian ventures, small medium enterprises or start-ups that are beneficial to the economy | Social enterprises, modest businesses, and early-stage companies |
Category II AIFs | Funds that invest in infrastructure, real estate and private equity without employing intricate strategies | Infrastructure initiatives, private equity, and real estate |
Category III AIFs | Funds that implement intricate trading strategies, such as leveraged investments to generate short-term returns. | Market-oriented strategies, hedge funds. |
AIFs can be considered for high networth individuals and institutional investors, with a minimum investment of INR 1 crore. Prospective AIF investors should be aware of this. Diversification benefits from AIF’s low correlation with typical market instruments allow skilled investors to explore other asset classes and strategies that may yield returns.
Highly Rated Alternative Investment Funds
High-rated alternative investment funds aim to consistently outperform in terms of risk management, return on investment, and portfolio management. Investors prefer these funds because they diversify portfolios through private equity, venture capital, and structured products.
Their potential for higher returns and lower correlation with traditional stock and bond markets make them an attractive option during market volatility.
When selecting high-rated alternative funds, it is critical to consider the fund management's track record of performance, trustworthiness, and experience, as well as the associated risks.
A fund that has a track record of continuously providing significant returns while successfully controlling risk is often considered to be consistently performing.
SEBI data on alternative investment funds show a large cumulative net inflow of investments as of June 30,20241. This shows the growing interest in AIF’s for their diversity and high returns.
When Do Alternative Investments Perform The Best?
Alternative investments often outperform with low interest rates, inflation, or market turbulence. The rationale for this outperformance is the lower correlation between these assets and the stock market, which assures a constant income stream during times of economic volatility.
For instance, while traditional assets, such as fixed deposits, yielded an average return of 6.8-7.2% in 20232, it was insufficient to surpass inflation in India, which was still on the rise. Conversely, corporate bonds presented a more appealing alternative for investors seeking inflation protection.
The post-pandemic recovery boosted the Indian corporate bond market in 2023. Corporate bonds had greater yields than government securities and other conventional assets. Therefore NSE predicts that after clocking a compound annual growth rate (CAGR) of ~9% over the past five years, the Indian corporate bond market is set for even faster growth3.
How To Maximise Returns With Alternative Investments
Risk and reward must be balanced in a diverse portfolio to maximise alternative investment gains.
Combine securitised debt products for liquidity, real estate for long-term appreciation, and corporate bonds for regular returns to minimise market risk and improve yields.
For instance, a diversified portfolio can look like:
- 40% to corporate bonds for consistent income
- 30% to real estate or private equity for capital appreciation.
- 30% to securitised instruments or alternative funds for added liquidity and yield.
This approach enhances the overall resilience and return potential of the portfolio by distributing risk across various asset classes, particularly during periods of volatility in the market. One should optimise the allocation by considering market conditions and risk tolerance.
Important Considerations Before Investing
Considerations before investing in alternative assets
Consideration | Description |
Risk appetite and financial goals | Evaluate your risk tolerance and align your assets with short-term income and long-term wealth. |
Short-term vs. Long-term goals | Define whether your investment horizon is for long-term growth or immediate returns, as this will affect the selection of assets. |
Market conditions and Trends | It is important to examine economic reports, forecasts, and current market trends. SEBI and are among the resources that offer valuable insights into the bond and equity markets. |
Consulting a financial advisor | Professional advisors can create a customised investing strategy based on your financial goals. |
Conclusion
To reduce risk and improve profits, diversify your portfolio with alternative assets. Investments in corporate bonds, securitised debt instruments (SDIs), and asset leasing offer consistent income, lower market correlation, and higher yield. With the market constantly shifting, a balanced portfolio of traditional and alternative investments can increase long-term financial stability and growth. Diversification remains the primary approach to generating substantial returns in any economic environment.
Are you prepared to improve your portfolio by incorporating high-return alternative investments? Begin your journey towards financial success today by exploring a diverse array of investment options with Grip Invest. Sign up today!
Frequently Asked Questions On Alternative Investments
1. How do alternative investments vary from regular ones?
Private equity, hedge funds, and real estate are complex, less liquid and less correlated with the stock market. They frequently generate higher returns. Nevertheless, they require further research and comprehensive analysis.
2. Alternative investments can create monthly income in what ways?
Asset leasing generates income through monthly lease payments, dividend-paying equities offer regular dividends, and alternative investments such as corporate bonds pay periodic interest.
3. How risky are alternative investments versus traditional ones?
The illiquidity, complexity, and market sensitivity of alternative investments can lead to an increase in risk. Although their potential for higher returns and their diversified nature can be used to mitigate portfolio volatility when implemented effectively in comparison to conventional assets, nonetheless.
References
- SEBI, Accessed from https://www.sebi.gov.in/statistics/1392982252002.html
- The Economic Times, Accessed from https://tinyurl.com/etfdrates
- NSE, Accessed from https://tinyurl.com/nseindiapdf
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