You may be a millennial looking to diversify your traditional portfolio with new-age investment options, or a Gen Z investor keen on curating a modern investment portfolio. Or, you may even be a Gen X investor who is interested in keeping pace with the rapidly growing world of investments in India.

 

Whatever category you may belong to, the good news is that there are plenty of new-age investment options that can diversify your portfolio and give it a boost. So, without further delay, let’s jump right into the details and check out some of the top ‘hot’ investments in the market right now.

 

1. Cryptocurrencies

Cryptocurrencies are digital currencies that can be bought and sold online. As with any other asset class, including fiat currencies, the prices of cryptocurrencies fluctuate on a regular basis. Traders generally use these price movements to make quick profits. But if you are planning to invest over the long term, you can still include cryptocurrencies as a part of your modern investment portfolio.

 

These digital currencies run on blockchain technology. There are many popular cryptocurrencies today, such as Bitcoin, Ethereum, USD Coin, Binance Coin and more. Here are the key things to keep in mind before you make crypto investments.

 

  • Cryptocurrency gains are taxed in India at 30%.
  • It is advisable to invest in a cryptocurrency project that you understand.
  • Crypto assets are volatile, so you can invest small sums regularly to average out the cost.

 

2. ESG Mutual Funds

ESG investing is a phenomenon that has been gaining ground significantly in recent years. The term ESG is an acronym for Environmental, Social and Governance factors. So, this technique of investing essentially involves putting your money in stocks of companies that are doing the right thing environmentally, socially and with respect to governance. ESG mutual funds are simply funds that invest in the stocks of companies that meet the ESG criteria.

 

Investing in ESG funds is quite like investing in any other mutual fund. So, you can even start an Systematic Investment Plan (SIP). Many leading mutual fund houses in the Indian financial market have launched ESG funds. Here is what you should know before you invest in them.

 

  • Long-term capital gains over Rs. 1 lakh from ESG equity funds are taxed at 10%, while short-term capital gains are taxed at 15%.
  • You can use the benchmark ESG index — the Nifty 100 ESG — to get a good idea of the top ESG companies in the market.
  • Like all equity investments, ESG funds also come with an inherent market-linked risk.

 

3. InvITs

InvITs or Infrastructure Investment Trusts are modern investment options that function like mutual funds. The common pool of funds from the investors is used by the trust to invest in a mix of infrastructure-oriented income generating projects like roadways, power plants, railways, gas pipelines and more. InvITs are regulated by the Securities and Exchange Board of India (SEBI), making them less risky than unregulated assets like cryptocurrencies.

 

If you are looking for a long-term investment option that is backed by the government, although indirectly, InvITs make for a good choice. They allow you to invest in public utility assets and generate income from these investments. Here are some points to note about InvITs.

 

  • Similar to mutual funds, short-term capital gains on InvITs are taxed at 15%.
  • Long-term capital gains exceeding Rs. 1 lakh are taxed at 10%.
  • You can purchase InvITs listed on the stock exchange using your demat account.

 

4. Real Estate Investment Trusts (REITs)

REITs are companies that own income-generating real estate properties. The portfolio of these trusts or companies include commercial or residential buildings that generate high levels of rental income. By investing in REITs, you can benefit from the company’s portfolio. There are two ways in which you can benefit from your REIT investments —

 

  • Stock appreciation, which is an increase in the value of your investment in the company
  • Dividends, which REITs are mandated to pay out to the extent of 90% of their income

 

In India, you can add REITs to your new-age portfolio by purchasing units of these companies from the National Stock Exchange or the Bombay Stock Exchange. They help you diversify your holdings and invest in real estate without shelling out a huge sum of money upfront.

 

5. International Equity

Another interesting way to diversify your portfolio with new-age investments is to take a conventional asset class and invest in it in the international market. In other words, international equity. You can now invest in the top global stocks from India and increase your exposure in the best international companies. Many retail investors in India are showing greater interest in global stocks, with the US stock market emerging as a top favourite.

 

You can invest in international markets through international mutual funds in India. These funds curate special portfolios consisting of global securities. You can start an SIP or invest a lump sum amount in the international equity mutual fund of your choice.

 

Conclusion

Keep in mind that most new-age investment options carry a higher level of risk than conventional investment avenues. That said, they also carry the potential to deliver higher returns on investment. In other words, the risk and the rewards are both high. So, it is always a good idea to balance your new-age investments with stable assets and investment schemes. This helps reduce your portfolio’s overall exposure to risk.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.