Money Masterclass: Don’t miss the bus on these emerging investment trends

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Since the launch of Money9 on January 29 this year, I have spoken to many investment advisors and financial planners. Most have spoken about the traditional SIPs and mutual funds as a way to invest and grow. Many have shared insights on gold-based investing. Some have even ventured into the more complex debt market instruments. But three trends have stood out for me, personally having hosted Money Masterclass on Money9.

1. Investing in ESG will reward in the long term
2. Geographic diversity will reduce risk
3. Fractional ownership in real estate will yield better

Let’s look at what these trends are and why they are likely yo reward.

• ESG – Environment, Social, Governance

You can read more about what ESG funds and and how you can invest here. But in a nutshell, ESG scores are numeric values assigned to companies on their sustainability quotient. These are companies that do business responsibly and care as mush for the stakeholders (society) as they do for the shareholder.

The proof of the pudding is in tasting it. The proof of a concept is in the numbers.

NSE’s Nifty 100 ESG index has outperformed the benchmark Nifty50 and Nifty100 as well over a one year and a two year period by approximately returning 5% more to investors.

What’s more? There are ESG Funds available across many AMCs for mutual fund investors to push their investments into more sustainable companies rather than those who pollute or do little for social good. Experts believe that socially responsible firms will be more profitable in the long run too.

Go ahead and speak to your portfolio manager about ESG Funds and make your money grow the right way.

• Geographic diversification

For those who are familiar with the world of equity investment – directly or through mutual funds, it may be a good idea to look at global diversification. US capital markets are mature, have a variety of stocks to choose from and offer the dollar advantage to investors.

Why geographic diversification? Just to hedge oneself from a region-specific risk. If India’s GDP numbers remain low and NPAs continue to rise, markets will react and so will your portfolio. But if you held, for instance, FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) and technology stocks continue to boom during the pandemic and beyond, your Indian losses will be compensated by US gains.

Again, international funds are a good way to invest internationally and fintech companies make the job easy. Read up on these trends and see if they suit your style.

• Fractional real estate investments

Oh yes, you can partly own that super expensive penthouse along with a dozen other folks you’ll possibly never meet! And all of you will share the rent without really managing the house like a landlord would.

So that’s what fractional real estate investing is. Commercial and residential properties co-owned by a group of people who invest either through a Special Purpose Vehicle or through a private trust. Yes, physical properties with an address and real occupants.

Imagine a house that costs one crore rupees. Now ten people get together and pool in 10 lacs each and register one tenth of the property in their respective names. A third party manages rentals and each party gets a tenth of the rent yield.

What happens once the property price appreciates? Any one or more individuals sell their fraction of the property at prevailing market rates and walk out with a profit.

Yes, there are marketplaces online that let you do that today.

Read more about that emerging trend here.