High net-worth Individual (HNIs) is a category created by financial institutes to refer to individuals who have assets beyond a certain limit. In India, individuals with more than Rs. 2 crore surplus fall into the category of HNIs. The recent years have seen the accumulation of a considerable portion of wealth in the hands of these HNIs. As such, it only makes sense for the rest of us to wonder about their money management and investment strategy.
All HNIs usually deal with massive amount of monies and having a detailed investment strategy in place is a given. The best investment system, of course, differs from person to person. However, they have two things in common — a diversified investment portfolio and a structure to their portfolio. They may avail portfolio management services to achieve a diversified investment portfolio or to come up with the best investment system which suits them.
Here are some pointers you can take from the books of HNIs to assemble your own diversified investment portfolio.
Coming up with the Best Investment Plan:
· Know the fees: If a person has achieved an HNI status, chances are the person invests — regularly. They may avail investment management or portfolio management services but they do invest. A diversified investment portfolio may contain anything and everything including stocks, real estate, bonds, and gold. And when one invests, there are bound to be investment fees. The investment fee for various investment might not seem much individually, but can add up to a substantial amount when added up. Also, as their investments grow, the investment fee will grow as well. Hence, it is essential to know how much one is paying by way of investment fees. Investment fee for different investment options can be compared to take a better decision.
· Tax-Saving Investments: Indian tax laws are notorious. Most of us end up paying a considerable portion of our incomes by way of taxes. It is an endless loop. One way to get out of this loop is to start investing in tax-saving investments in the early quarter of the financial year. There are multiple investment vehicles by investing in which investors can claim tax deductions. This reduces the money one loses by way of taxes and also gives them an opportunity to earn returns. Any best investment system will include tax saving investments options.
· Diversification: The importance of diversification cannot be stressed enough. Look at the portfolio of a High net-worth Individual and one will find that the HNI has a diversified investment portfolio. This is one mistake that HNIs never make. Portfolio Management Services also emphasize on having a well-balanced and diversified investment portfolio which includes tangible as well as intangible assets. HNIs include real estate, land, gold, bonds, shares, ETFs and even artwork. Constructing a diversified investment portfolio is one of the best investment system.
· Rebalancing: Rebalancing is another practice that HNIs follow to make their investment plan the best investment system. HNIs regularly rebalance their investment portfolios. Rebalancing a portfolio from time to time helps to ensure that the portfolio has enough diverse investments. It also helps to make sure that resources are allocated proportionately. HNIs can either rebalance their portfolios themselves periodically or set parameters for their portfolio management services. So, even if one achieves a diversified portfolio, they shouldn’t stop their efforts there. The portfolio should be visited often to check the investments which are working and to eliminate the ones which are not. One can also allocate resources differently to get the balance back.
· Professional Help: It is true that there are HNIs who have achieved this status by themselves. However, there are many others who have undertaken professional help to achieve this feat. Investors who are familiar with the functioning of the investing world or the stock market or those who have spent years investing and trading might be well suited to trade by themselves. However, for those who rely on the advice of others, the risk is higher. Hiring professional services is a smart way to move forward. These professionals are experts who have been investors themselves and are aware of the integral working of the market. Today, one can find dedicated services investment management, wealth management, and like Portfolio Management Services. One can also opt for holistic service providers that do everything from wealth management to estate planning!
The most important thing to remember is that High Net-Worth Individuals did not become High Net-Worth Individuals overnight. It took time and patience and lot of trial and error to reach this point. These HNIs come up with their own investment strategies. They also planned for contingencies with their savings plan and emergency funds. Your aim should be to draft the best investment plan that works for you.