Own Anything, At Least in Part
It’s been more than two decades Rihaan Gupta started building up his assets portfolio brick by brick. He kept a hawk eye on the markets to select sectors where to invest his money for the best returns. By the time he turned 40, he had a house to his name and a good investment spread meticulously across equities, debt and other physical assets like gold and jewellery.
That was quite a success yet, some dissatisfaction kept gnawing him. Commercial properties drew his attention for quite some time. Such properties were fetching high returns in metros. But Rihaan wasn’t rich enough to buy an entire property in a prime location. A few years back, he heard of fractional ownership which would make him a part-owner of the property against an investment of only a few lakhs. These are just papers that he can sell in the future, and these promises to earn him handsome returns and result in capital accretion.
Some three years have passed since. He is earning rent on them, although he has never visited any of the properties. Rihaan is now wondering if he would hold some in cryptos like Bitcoins in his asset portfolio. An asset class that didn’t exist even some years ago.
Over the years, the form of ownership in asset management has evolved rapidly, graduating towards a scenario where assets physically held have assumed virtual form. With digital disruption redefining and reshaping every sector, most asset classes are turning to their virtual forms.
Commodities, another significant asset class, has evolved significantly from the days of the barter system to the present day of transferring the title of goods through electronic exchanges in the form of forwarding, futures, and options. “Today, futures and options contracts can be traded on exchanges around the world on a huge array of metals, energy products, and agricultural products. These standardised contracts enable producers of commodities to offload their price risk to end-users and other financial market participants,” says Ramesh Varakhedkar, Head of Comodities and Currencies at ICICI Securities.
You can buy and sell grains in the commodities market without seeing the product you are buying unless you decide to hold it beyond a stipulated period. Likewise, you can be a part-owner of a commercial property without the need to visit it before buying. Yet, you start receiving rent, and you can resell it.
Gold, which primarily remained a physical asset class, has turned virtual, so has commercial real estate and commodities, with a clause. Insurance turned completely virtual in India last year with no necessity to hold a physical policy document.
Going by the trend in the market, it is anybody’s prediction that assets will increasingly go digital. It will a lot more than just cryptocurrencies and a few niche tokens. With digitisation, assets will turn increasingly affordable and enable investors to buy fractions of the whole asset, making it cheaper yet offering the same opportunity for value creation in percentage terms. Although the Indian authorities are yet to legalise cryptocurrencies, an increasing number of Indian investors, especially millennials, are driving part of their funds into the digital currency. A massive surge in Bitcoin value is making the market attractive.
Digitisation would also allow a more significant type of asset class to be included in one’s portfolio. This could be the biggest change one would see during this decade. With more investors, traders, and innovators, the trends indicate a better future that promises affordable investment avenues yet higher returns on investment.
Who knows, Rihaan’s next investment could be in a vessel in high seas. And, he wouldn’t have to set sail, only pump in as much as he wants and part-own the ship.
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New Asset Classes
Cryptocurrencies
Non-fungible token
Fractional real estate
Fractional infrastructure
Foreign equity
Road Ahead