Ultra HNIs have varying investing approaches, beginning from new-age entrepreneurs who have constructed worthwhile firms, to scions of organization. Experts say, even although there are similarities when it comes to their investments, it will be incorrect to assume that it is all in the very same avenues.
Anurag Jhanwar, Co-founder, and Partner, Fintrust Advisors says, “High Networth Individuals are widely defined as those having an investible surplus of more than Rs 5 crores. By 2027, there will 9.5 lakhs HNIs from close to 3 lakhs currently. HNIs form 58 per cent of India’s GDP, with close to 30 per cent based out of Mumbai and Delhi alone.”
Traditionally, HNIs used to rely on a mix of equity and debt investments for increasing their wealth. Along with financial and market place cycles, the preferred asset classes also kept varying.
For instance, about a decade ago, genuine estate was a favourite for investors. According to an RBI report from 2017, ‘Indian Household Finance Survey’, amongst other issues it stated, the typical Indian household holds 84 per cent of its wealth in genuine estate and other physical goods, 11 per cent in gold and the residual 5 per cent in economic assets. Commercial genuine estate is one such asset class that had seen a substantial improve in allocation. However, due to lack of returns from this asset class as effectively as beneath-overall performance for a prolonged time, specialists say there came a shift in preferences. Over the years there is a tilt in the preferences towards economic assets more than physical assets.
Jhanwar, adds, “HNIs have relied on a mix of debt and equity investments to plan their retirement and provide funds for their children. Over the years there has been a shift towards alternative asset classes which offer instruments that match the cash flows with liquidity and inflation.”
Going by the figures, in 2019 equities remained the most preferred asset class in the portfolio with 29 per cent allocation, followed by 21 per cent allocation for bonds and 20 per cent for house investments. “Unlike retail investors who prefer diversifying their portfolios for preserving their wealth, the HNIs focus on concentrated portfolios to create more as they plan their strategies from a long-term perspective,” says Jhanwar.
Here are some of the blunders riches must steer clear of whilst managing their fortune!
Avoid becoming pernickety or fussy
Experts say it is normally greater to be hands-on with one’s finances and wealth. However, Jhanwar says “what concerns is the riches’ tendency to emphasise on minor or trivial details and lose sight of the big picture. For instance, giving unnecessary importance to either tax efficiency or resisting critical rebalancing of one’s portfolio for the want of saving exit loads, etc.
Avoid being an emotional pendulum while making investment decisions
According to experts adopting a balanced and disciplined approach to one’s portfolios may sound easy, however, it could become extremely difficult to follow. Jhanwar says, “HNIs are often found oscillating between fence-sitting and super active when “FOMO” kicks in. To be capable to invest effectively, HNIs will have to calmly concentrate on asset allocation and steer clear of this evil habit of an emotional pendulum.”
Avoid drifting towards more complicated – even basic investments are equally crucial
The more funds one has, sector specialists say the greater the choices for them to move from plain vanilla goods like stocks, MF, FD, bonds to more complicated goods like PE funds, art funds, genuine estate funds and structures. Hence, comply with your advisor’s guidance and invest only when it merits to incorporate the more complicated goods in your portfolio, not only since they are exotic.