High Networth Individuals are widely defined as those having an investible surplus of more than 5 crores. By 2017, there were close to 2,70,000 HNIs in India. This number is predicted to touch 9,50,000 by 2027. HNIs have a combined wealth of almost $ 1.5 trillion or 58% of India’s GDP. It is estimated that there are more than 80,000 HNIs based out of Mumbai and Delhi alone.
If you are among those who can be categorised as an HNI and are wondering about how to invest your wealth, here are four investment options to consider:
Real Estate
Real estate is broadly divided into residential real estate and commercial real estate. It is no secret that a large proportion of Indians over several decades have been partial to real estate as an investment destination.
Residential
Residential real estate has always been a popular option for HNIs. Multiple homes are bought either to be placed on rent or to be used as a holiday home or for the younger generation to use or for all these purposes. Thanks to surging incomes, easy availability of bank loans and appreciation in prices of residential real estate post-liberalisation, HNIs have always perceived residential real estate as a safe destination to park funds. The passing of RERA has offered substantial transparency as well as redressal mechanisms to HNI home buyers. Developers have been constructing projects with high build quality and several amenities appealing to HNIs.
Commercial
Commercial real estate has emerged as a preferred investment destination for HNIs. The average yields offered by commercial real estate are higher than those offered by residential real estate. Returns can average around 6% to 8% depending on the micro market and could also touch 11% in some instances. Yield is calculated as dividing the annual rent by the market value of the property and multiplying the quotient by a hundred. So, if the value of the property is Rs 1 crore and the annual rent received is Rs 6 lakh, then the rental yield turns out to be 6%. Demand for Grade A office spaces have been picking up in prime locales. These properties turn out to be high-income generating, low-risk assets. Apart from office spaces, HNIs can also consider warehouses, shopping centres, etc
Equity markets
Among the Rs 1 trillion-plus markets, India has been the best-performing equity market over the last 25 years. This has been primarily due to the steady inflow of funds from foreign investors who have been bullish about India’s growth post liberalisation.
Directly
Those who are adept at doing substantial research and also possess relevant experience can invest directly in stocks. Savvy investors scout for multi-bagger opportunities but at the same time, build a robust portfolio. First-time investors can invest directly in shares of companies with strong fundamentals.
Mutual funds
For those who neither have the time nor the expertise to invest directly in the markets, investing through mutual funds is the most suitable option. HNIs can choose from a plethora of options when it comes to picking a mutual fund to invest in. One can either invest a lumpsum or in tranches through a systematic investment plan.
Hedged equity products
However, overexposure to equity can swing one’s portfolio substantially due to volatility. Ups and downs in the market could occur due to macro issues such as disturbances in global trade or unfavourable geopolitical scenarios. Therefore, HNIs would be well advised to consider hedged equity products. These products can protect the downside to their portfolios.
Sovereign gold bonds
Gone are the days when one had to get stressed about the purity of gold while purchasing it. One can instead consider purchasing sovereign gold bonds. These bonds are issued by the government of India. Popularly known as ‘paper gold’, you can buy these bonds online. You don’t need to worry about saving them in a physical locker. To top it all, you will also earn an assured yield of 2.5% per annum interest.
One need not feel overwhelmed about all these different offerings. One can also seek consultation from a professional wealth manager to handle these investment avenues and help generate optimal returns.
You can always rely on a dependable partner such as HDFC Bank to help you lay The Right Foundation for Your Investment Success.
Check out a variety of Investment Services & choose the best one.
So, now that you know the various investment options for high network individuals, which one will you opt for?
Sources
https://qz.com/india/1316124/india-will-have-nearly-a-million-millionaires-by-2027/
https://www.dnaindia.com/personal-finance/report-commercial-property-is-new-hni-gold-mine-2662454
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