To an investor, markets serve as a barometer of the uncertainty and chaos existing in the real world. The scenario being as it may, we are constantly on the lookout for more and better alternatives to help us realise our wealth creation goals. We are astute enough to know that in our world, every challenge comes with an opportunity. Our only goal? To find it.
The scenario is grim
Today, this uncertainty is trading historic highs and lows on a daily basis, led by the state of the US economy which is slowing down. Rising inflation and commodity prices along with loss of jobs, and international conflict coming on the back of the pandemic have all created an environment where consumer confidence has hit rock bottom.
The S&P 500 has seen a ~17% dive and Nasdaq ~30%. Cryptos have crashed . EU is grappling with a cost-of-living crisis due to high inflation and rising energy bills while facing international conflict on ground. The EU’s region-wide STOXX 600 index has lost ~20% of its value this year . As a result of drop in demand overall, the Chinese economy is caught in a slow-storm – its GDP is expected to fall from 8.1% in 2021 to 2.8% in 2022 .
The global economic outlook, therefore, remains grim. With the exception of India. India’s Nifty has gained 2-3% over the year outperforming global indices by a significant mile. While it would be naïve to expect India to shield itself completely from a global recession, there is strong hope that India will hold its own; and with it, investors’ interests too. Here’s your window of opportunity.
India’s got the edge
Indian markets are currently on a high, with Nifty 50 touching its lifetime high in November even though certain values are seeing sharp downward trends, especially IPO collections and deal values.
Yet, a majority of business leaders expect a recession to fully hit home by next year, setting up a downward course over the near term. Which means, markets could undergo a major correction with far-reaching impact on industry and investment. When that happens, traditional avenues such as real estate begin to gain.
Know your type
There are two ways to look at this phenomenon. One is to ride the bull on optimism, believing the bears won’t *really* show up. Another is to rise above the daily struggle between the bulls and the bears. That is option Two. Option One is for those hooked to the adrenaline rush of watching the numbers change on the ticker day each day. The strategy is high risk, high return, but not much use in a bear market.
Option Two really is for the wealth creator who creates value by holding steady in choppy waters.
Their wealth is parked safe in a place away from rallying bulls and trampling bears; where it can grow under the supervised care of experts. We’re talking ‘alternatives’ – the common name for Alternative Investment Funds (AIFs). This one is expertly calculated risk-taking with high returns. AIFs are privately pooled funds that cater to five categories such as hedge funds, private capital, natural resources, real estate, and infrastructure. They offer a non-traditional way of investing in traditional assets – real estate, for example.
The best alternative is long term
Alternatives have been gaining ground in the recent years owing to several factors in play. Key among these are investors’ need for high returns and high security backed by high leverage driven by specialised knowhow. AIFs are complex vehicles as they do not directly correlate to market movements. For those who bring in high stakes to the table, this is a safe hedge against volatility. Let’s break down these benefits in view of the economic climate we are currently facing.
– High on leverage: Investing in alternatives is a way to immerse your capital in areas dominated by people who have achieved solid depth in that space. They manage your capital actively and aggressively, using highly advanced methodologies at their disposal. As a result, AIFs are marked by a potential for high returns.
– Risk diversification: AIFs offer an interesting way to diversify risk as markets turn volatile. The strong potential upside in returns makes it a reliable way to ensure your portfolio absorbs any shocks that may result.
– Making your portfolio anti-fragile: Assets like precious metals and real estate have been traditionally valued since ancient times because they deliver real value. These assets, while they may not be resistant to volatility, are certainly highly resilient over the long term, making them anti-fragile – a quality you want your portfolio to have. AIFs help you do this while cushioning the volatility: a win-win.
Real estate always lands on top
Land is one of the most valued assets throughout human history but particularly so for Indians. In our society, real estate (RE) is a matter of emotional and social security, a tradition that new-age trends of ‘renting not owning’ has not managed to dent. Moreover, with current market conditions being as they are, the new crop of investors (Indians and NRIs) is going all in on RE regardless of whether or not they are dabbling with assets that are more ‘current’ such as cryptos, NFTs, etc. Lately, Indian markets have seen a strong growth of non-conventional investment options in traditional areas; for instance, the rise of gold ETFs in the precious metals space, REITs in real estate, and now the time is ripe for Alternatives. Ultimately it is important that schemes involving residential and commercial projects are backed by robust research, advanced technology, as well as a strong focus on sustainability and ESG aspects.
Source : The Times of India