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High Net-worth Individuals (HNIs) are widely defined as those having an investible surplus of quite Rs 5 crore. By 2027, there'll 9.5 lakh HNIs from on the brink of 3 lakh currently. HNIs form 58 percent of India’s GDP, with on the brink of 30 percent based out of Mumbai and Delhi alone.
Traditionally, HNIs want to believe in a mixture of equity and debt investments for growing their wealth. However, over the years, that appears to possess change. Now there's a rising shift towards alternative asset classes.
Changing investment preferences
Commercial land is one such asset class that has witnessed a considerable increase in HNIs’ fund allocation. While retail investors prefer diversifying their portfolios to preserve the wealth, HNIs tend to specialize in concentrated holdings. Also, there's a notable growing shift towards financial assets over physical assets within the HNI fraternity.
Going by the figures, the property is that the third-largest investment class for HNIs, after equity and debt. Its share is sure to increase in the future. In 2019, equities remained the foremost preferred asset class within the portfolio with 29 percent allocation, followed by 21 percent allocation to bonds and 20 percent to property investments.
As a fallout of the pandemic, HNIs/UHNIs are forced to require a better check out their portfolios and align it as per the perceived risk. Broadly, we've seen a large impetus to portfolio re-balancing. Between 20 and 40 percent of wealth has moved from equity to debt – with the security of capital being the divisor – followed by 20-30 percent exposure to quality stocks during a phased manner. the autumn within the share markets led to the supply of quality stocks at attractive prices.
While it's pertinent to seem for the proper opportunities, alternatively, investors should hold take advantage of their portfolio also. In Warren Buffett’s words, “Cash to has real value, like many other aspects of investing. Cash isn't just an asset class that's returning next to zilch. it's a call option which will be priced.” Hence, when that option is reasonable relative to the power of money to shop for assets, it's prudent to allocate some a part of the portfolio to cash or cash equivalents, albeit the interest rates aren't so lucrative
Avoid being fussy
It is always better to be hands-on together with your finances and wealth. But many rich people tend to put an excessive amount of emphasis on minor or trivial details, making them lose sight of the “big picture.” Attaching unnecessary importance to either tax efficiency or resisting critical rebalancing of their portfolio for saving exit loads are but a couple of such examples.
Avoid being an emotional pendulum while making investment decisions
Adopting a balanced and disciplined approach to one’s portfolios may sound easy to follow. However, in practice, it becomes extremely difficult. HNIs are often found oscillating between fence-sitting and being super active when FOMO (fear of missing out) kicks in. To be ready to invest successfully, HNIs must calmly specialize in asset allocation and avoid this evil habit of being an emotional pendulum.
Avoid drifting towards more complex products
The extra money you've got, the upper the choices you've got for its deployment far away from plain-vanilla options like stocks, mutual funds, fixed deposits, and bonds, to more complex products like private equity, art, land funds, and structures. Heed to your advisor’s guidance and invest only it merits incorporating the more complex products in your portfolio, not simply because they're exotic.
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