Commotion of IPO Hysteria

With hullabaloo around the IPOs hitting the markets yet again following the trend throughout 2021, with the companies going public in a rush, a primary consideration is that a trend in the market can be a double-edged sword with the flip side risk commensurate to the upside potential. The motto in the investment parlance should be "You Win Some, You Lose Some". While India's primary market has attracted a lot of interest from the investors with more than 2X funds raised by firms on a Y-o-Y comparison between 2020 and 2021 (till end of Oct'2021, and several still tentatively lined up before the end of the year), not all who received allotment garnered a fortune.

Many investors have been searching online and consulting financial advisors for strategies and tricks - tracking GMP, putting through multiple applications through demat accounts held by friends and family, applying at the earliest possible from the IPO opening hours etc to improve the chances of getting an allotment in a ‘Good IPO’. However, these strategies seldom work in a highly unpredictable IPO market. No wonder, Warren Buffett said it right: “An IPO is like a negotiated transaction - the seller chooses when to go public but it’s unlikely to be at a time that is favourable to you.”

The real game analysis and predictability is built upon the capability to segregate the bad apples (over-priced, over-valued, poor quality business, and disastrous motivation for listing) from the right bets (growth prospects, business & industry stability, and future earning potential). Many times expectations and IPO price are too high to subscribe at the time of IPO. As a company takes some time to deliver on expected growth, impatient investors or investors with a myopic vision (just for profit making to make a few quick bucks) sell out. Investors who are optimistic of the changing situation and macro- or micro- economic factors that will or may influence the price movement, buy in or stay invested and benefit from any appreciation. Only savvy investors understand the meaning and value of being “patient” with companies which have long-term potential.

Millennial's Guide to Real Estate Investing

From the pandemic induced lock-downs and remote working options , to loss of pay due to loss of employment and increased financial burdens, the situation had many of us think about our future plans and financial goals.

The low-interest rate regime, and clarity due to the implementation of RERA are giving confidence to millennial home-buyers to get into real estate investing. However, compared to renting out a house, purchasing a house involves a lot more research, meticulous planning, and deliberation since it will most likely be the biggest financial decision for most people. For millennial on the lookout to purchase their first home, a few important aspects to be factored in before investing -

Budgeting: This possibly is the most important factor before going ahead with any purchase. Keep the following checklist: 

1) Your credit score (check across the credit information bodies like CIBIL, Experian, Equifax etc, as different financiers refer to one/more scores) 

2) The repayments (EMI) for the intended loan amount should ideally not exceed half your monthly budgeted spend target or savings

RE Consultant: With an abundance of real estate aggregators and agents, offline as well as online, one should engage with a intermediary who will 

(1) help with detailed information and understanding of prevailing dynamics in the project, vicinity you are investing in 

(2) facilitate the paperwork, assist in coordinating with legal teams, the registrar's office, etc. which can be a painful process for a first-time buyer

Identification: While, most suggestions around are of opting for a ready-to-move-in unit considering that the construction quality levels are confirmed before purchase, it is also paramount to identify a developer with a good track record. For developers having a consistently good track record in delivering quality homes, you can bet on both ready or under construction projects.

Connectivity: It is prudent to factor the amenities, connectivity to transport hubs along with an understanding of the neighborhood and the future infrastructure development potential on offer.

Portfolio Management Services

To invest is to allocate money in the expectation of some benefits in the future. Investment can be done in various categories or asset classes like:
a) Private Equity Investments into Startups, SMEs and other promising projects

b) Investment in Equity & Debt Securities

c) Investment for short-term returns by trading strategies

Portfolio Management Solutions is an investment portfolio in Stocks, Debt and Fixed Income products managed by a professional money manager. As you invest in PMS, you own individual securities unlike a mutual fund investor, who owns units of the entire fund. This investment plans enables the investor to purchase a stake in a good company, while the company selling the stake receives capital infusion to grow its business. As an investor you have the freedom and flexibility to tailor your portfolio to address personal preferences and financial goals. Although portfolio managers may oversee hundreds of portfolios, your account may be unique.

Why Should You Go For PMS?

1) Professional Management: Professional management of portfolios with the objective of delivering consistent long-term performance while controlling risk

2) Continuous Monitoring: It is important to recognize that portfolios need to be constantly monitored and periodic changes made to optimize the results

3) Risk Control: A research team responsible for establishing the investor's investment strategy and providing the PMS provider real time information to support it, backs any firm's portfolio managers

4) Hassle Free Operation: A customised service for the investor. The fund management team takes care of all the administrative aspects of the investor's portfolio with a periodic reporting (usually daily) on the overall status of the portfolio and performance

5) Flexibility: The Portfolio Manager has fair amount of flexibility in terms of holding cash (can go up to 100% also depending on the market conditions). He can create a reasonable concentration in the investor portfolios by investing disproportionate amounts in favour of compelling opportunities

6) Transparency: PMS provide comprehensive communications and performance reporting. Investors get regular statements and updates from the fund management house or team. Web-enabled access, in some cases, ensure that the investor is just a click away from all information relating to the investment. The account statements give a complete picture of which individual securities you hold, as well as the number of shares you own. It will also usually provide the current value of the securities owned, the cost basis of each security, details of account activity(ies) like purchases, sales and dividends paid out or reinvested, portfolio's asset allocation and portfolio's performance in comparison to a benchmark

7) Customised Advice : PMS can be structured to automatically exclude investments you may own in another account or investments you would prefer not to own. For example, if you are a long-term employee in a company and you have acquired concentrated stock positions over the years and have become over exposed to few company's stock, a separately managed account provides you with the ability to exclude that stock from your portfolio.

Who, If and When

The Investment solutions provided by PMS cater to a niche segment of investors. The investors can be Individuals or Institutional entities with high net worth. The offerings are usually ideal for investors: who are looking to invest in asset classes like equity, fixed income, structured products etc, who desire personalised investment solutions, who desire long-term wealth creation and who appreciate a high level of service.

Apart from cash, the investor can also hand over an existing portfolio of stocks, bonds or mutual funds to a Portfolio Manager that could be revamped to suit his profile. However the Portfolio Manager may at his own sole discretion sell the said existing securities in favour of fresh investments. Meanwhile, the tax liability of a PMS investor would remain the same as if the investor is accessing the capital market directly.

Alternative Investments: Is it a Safe Bet?

While traditional investment avenues such as MFs, stocks, PPFs and the like, have been around and have been the preferred choice among investors and financial enthusiasts, there are other investment avenues available which are not known to many but might generate better returns than traditional investments. There investments are called as alternative investments in which risk tolerant investors can invest.

Alternative Investments are the non-traditional investment options and hence do not invest in traditional investment assets like equities, bonds, cash and bank deposits. Investments in alternative investments include private equity, private debt, hedge funds, vintages and collectibles like wine, art, paintings or cars. There’s still ambiguity whether to consider real estate as an alternative investment or not, but of late commercial real estate has got the interest of financial advisors, industry experts and investors' interest globally.

The beauty of any financial product or solution, whether it is the "tried, tested, recommended and suggested" (by the previous generations) PPF, Life Insurance (by LIC) et all, is that all of them come with a pinch of salt and pepper (pros and cons). While comparatively lower liquidity, absence of a clear benchmark to decide fair value, thus also leading to a lack of clear direction in valuation of a commodity (as part of the investment), the most worrisome factor is that historically the segment has been tarnished with  a few shams and scams (but look at it what has not, Stock Market scams, residential real estate, MF closing down). Remember High Risk High Gain, so while the risk of a downside is high, so are the benefits of an upside. Alternative investments come with the satisfaction and benefits of diversified portfolio, shield against the volatility associated with unit-linked investments and as stated much higher assured returns.

As oft-stated in advertisements "MF are subject to market risks", similarly in case of alternative investments, personal financial acumen and knowledge or having a financial advisor with a sharp aptitude and knowledge is paramount to secure your investments and gain from the upsides through 3Ps - Purpose, Patience, Perseverance