Beyond equities: Insights into bonds and FDs for risk-averse investors
Ajinkya Kulkarni, Co-Founder and CEO of Wint Wealth, shared valuable insights into the often-overlooked world of bonds during a Fireside chat titled ‘Risk-averse Investors:
Beyond Equities – Bonds’ at the ‘ETMarkets Emerging Investment Opportunities’ event.
Kulkarni illuminated bonds as debt instruments within the fixed-income asset class, emphasizing their role in diversifying investment portfolios. With over 17,000 bond options available across 14 categories in India, Kulkarni highlighted the promising landscape of bond investments. However, he acknowledged the prevailing challenge of investor unfamiliarity with bonds, questioning their understanding and the asset class’s catching up in popularity.
Reflecting on the historical context, Kulkarni noted the traditional inaccessibility of bonds to retail investors due to high ticket sizes, often reaching Rs 10 lakh. Yet, recent regulatory interventions, including proposed reductions in ticket sizes by Sebi, have transformed bonds into a more retail-friendly investment avenue. Kulkarni underscored the significance of these regulatory efforts, making bonds more attractive and viable for retail investors.
The removal of indexation benefits on debt mutual funds in March further propelled bonds into the spotlight, enhancing their appeal as an alternative investment avenue. Kulkarni elaborated on the necessity of diversification in bond investments, emphasizing the allocation of capital across multiple bonds to mitigate concentration risks. With regulatory support and increased accessibility, even smaller retail investors are now poised to explore bond investments with greater confidence.
Expressing optimism about the future of bonds, Kulkarni emphasized their crucial role in supporting economic growth. As governments push for infrastructure projects and encourage participation in capital markets, bonds are expected to evolve into an integral component of the economy. Kulkarni’s bullish stance on bonds resonates with their potential to foster a robust economy and offer lucrative investment opportunities for risk-averse investors.
FDs as an alternative to equities
Saurabh Jain, CEO of Stable Money, a platform revolutionizing India’s beloved asset class—fixed deposits (FDs), provided insights into FDs as a viable alternative to equities.
Reflecting on the prevalent market scenario, Jain addressed the primary question of whether investing in FDs is conducive to the current climate. Despite the popularity of mutual funds and stocks, Jain emphasized the significance of FDs, particularly given the prevailing economic conditions.
Highlighting the peak repo rates in India, Jain pointed out that FDs offer attractive interest rates, reaching up to 9.5% for senior citizens, amidst concerns about inflation. With repo rates remaining unchanged for the last five to six quarters and anticipated declines in the near future, banks are offering higher interest rates on short-term FDs. This unusual trend reflects banks’ anticipation of rate drops, leading to higher rates for shorter durations.
Jain emphasized the opportune moment for individuals to capitalize on these higher interest rates, reaching up to 9%, by securing shorter-term FDs. This strategy enables investors to benefit from higher returns while mitigating the risks associated with potential rate declines in the future.
Crypto Horizons: Exploring Future Opportunities in Digital Assets
Edul Patel, CEO and co-founder of Mudrex addressed some of the most common questions regarding Bitcoin and its investment potential. As the cryptocurrency landscape evolves rapidly, Patel aimed to shed light on key aspects to help investors navigate this dynamic market.One of the fundamental questions Patel tackled was the legality of Bitcoin in India. He referenced the India Strategy Paper by NITI Aayog, which highlights the potential of blockchain technology to streamline transactions and reduce bureaucracy. With India witnessing significant grassroots adoption of cryptocurrencies, Patel emphasized that buying, selling, transferring, and holding Bitcoin is entirely legal in the country. Moreover, regulatory frameworks, such as the Prevention of Money Laundering Act (PMLA), now extend to crypto companies, ensuring compliance and oversight.
Patel explored the rationale behind investing in Bitcoin, emphasizing its role as a high-risk, high-reward asset. Despite its volatility, Bitcoin has demonstrated a decreasing trend in risk coupled with sustained high returns over the years. He compared Bitcoin’s risk-return profile to traditional assets like equities and gold, highlighting its potential for portfolio diversification. Patel suggested allocating a modest percentage, typically between 2-5%, of one’s investment portfolio to Bitcoin for optimal diversification benefits.
Addressing the timing of investments, Patel discussed Bitcoin’s historical market cycles and the factors influencing its current trajectory. He highlighted the recent introduction of Bitcoin spot exchange-traded funds (ETFs), which have garnered substantial institutional interest globally. With Bitcoin emerging as a digital store of value and witnessing increased demand amid global economic uncertainties, Patel suggested that now is as good a time as any to consider investing in Bitcoin.
Patel offered some essential dos and don’ts for potential investors as well. He emphasized the importance of choosing reputable platforms with robust security measures and regulatory compliance. Patel urged investors to practice risk management through diversification and regular investments while avoiding speculative FOMO-driven behavior. He cautioned against falling for get-rich-quick schemes and advised investors to approach Bitcoin investment with a long-term perspective.
Understanding the World of REITs and Asset Tokenization
Meanwhile, Avijit Mishra, Co-Founder of Alt DRX, delved into the intricacies of Real Estate Investment Trusts (REITs) and the burgeoning realm of asset tokenization.
REITs, as Mishra explained, serve as vehicles for pooling investor capital to acquire, manage, and operate income-generating real estate assets. In India, Sebi-regulated REITs are listed on major stock exchanges, providing investors with access to a diversified portfolio of commercial properties spanning various sectors such as offices, hotels, retail, industrial units, and healthcare facilities.
Mishra emphasized the key advantage of REITs: their ability to lower the barrier to entry for investors. Unlike traditional real estate investments that demand substantial capital, REITs enable participation with smaller ticket sizes, offering liquidity through exchange listing. This accessibility opens doors for investors of varying financial capacities to benefit from real estate ownership.
Fractional Real Estate platforms empower investors to access real estate assets with smaller investment amounts, typically ranging from lakhs to crores. Sebi’s introduction of Small and Medium REITs (SM REITs) further democratizes access, allowing investments in single properties with reduced asset size requirements.
The concept of tokenization represents a paradigm shift in real estate investment. Tokenized Real Estate Assets offer ownership stakes in properties backed by digital tokens, enabling participation with minimal capital, starting from as low as Rs 10,000. Mishra underscored the potential of tokenization to democratize real estate investment and broaden access to wealth-creation opportunities.
Mishra emphasized on the transformative impact of REITs and tokenized assets in diversifying investment portfolios and fostering financial inclusion. By fostering greater awareness and understanding, these innovative investment avenues have the potential to drive inclusive growth and prosperity in the real estate sector.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)
(You can now subscribe to our ETMarkets WhatsApp channel)
