India’s rich and the wealthy have their money invested in real estate and gold more than stocks and bonds. Categorizing the wealthy into primarily three groups- the entrepreneurs, the inheritors and the professionals. We can take each group and analyze their tendencies towards investment. Firstly the entrepreneurs, who consider their business as a first port for investment and not just a wealth generating engine. Real estate and jewelry, constitute as a haven of high value investment and subsequently we can observe that after all such investments only less than one third of the wealth is left to invest in financial assets. The figures are different for the inheritors though, who have inherited large amount of gold as well as property from their forefathers and hence want to invest more in financial assets of the economy. As for professionals with a regular income, they have their fair share of wealth invested in none other than real estate and in other investments like employee stock options, unlisted equity and more. In the three categories listed above the most preferred asset classes are the ones who have their investments on debts and equity, as they are wealth creator as opposed to equity, venture capital, real estate funds who are more of wealth preservers.
Again individuals with irregular incomes such as ones engaged with film and sports industry receive lump sum on a sporadic basis. They typically show a tendency to invest in financial investments. They are keen to explore alternative alpha generators in the economy. They show their interests in risk adjusted returns. For instance they may invest majority of their money in equity and debt mutual funds, stocks and bonds and the rest in non-convertible debentures and alternative investment funds. And as for regular flow of income they invest in bonds though they are not very tax efficient. Their interest in ‘safety pot’ which is a portion dedicated towards non-risk capital at inception, consisting of high credit quality and risk-free assets is intriguing. The objective behind safety pot is protection of assets and generation of regular income. Considering the lump sum nature of their income the tendency is more towards in higher risk ventures in order to optimize returns. All the decisions though are taken after a detailed understanding of market and the risk return equation. But it is advisable to invest keeping in mind product suitability, caps on product exposure which are vital points especially for those with irregular incomes.
News Source: LiveMint
News Curated by editor at Wienerberger India