Gold ETFs – Indians have always been investing in gold for different reasons. It is a hedge against inflation. You can own gold by purchasing gold ETFs via your demat account without physically owning it. Thus investing in a gold ETF provides the advantages of liquidity and marketability. You can trade in it at any time during market hours. It is better than owning physical gold because it has no storage cost and therefore reduces the risks involved in physically storing gold. You have a tax advantage too.
Real Estate Funds - A Real Estate fund is a relatively newer asset form. They are close ended Portfolio management schemes that typically invest in infrastructure projects across the country with the idea to sell off when the project is complete. HDFC and ICICI have such real estate funds.
Private Equity Funds – Private equity funds invest in companies that are not publically listed. These funds typically invest in small dynamic companies in which they see good value and exit when the companies have become big in scale and size with a huge premium of course. One can invest in such a fund though the risk in this asset class is significantly higher. The amount required is quite high and typically HNIs look at investing in these funds. So if you have got a sudden windfall by winning a lottery or inheriting some wealth, you can look at this option.
Alternative assets lead to a more balanced asset allocation. This can bring in a positive difference in the portfolio especially when the performance in the equity markets is weak. However there is potential constraint on the upside. For example, if the stock markets are onto a big rally, then the inclusion of low-correlation alternatives could weaken the portfolio performance, relative to the traditional equity related investments.
One should take stock of the different investment avenues available and take a calculated risk depending on risk appetite and investment horizon.
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