The investment landscape of today is filled with a wide range of investment products that are present at nearly all points along the risk-return spectrum. Further, the innovation and digital first attitude of investment specialists and other stakeholders in the ecosystem is engendering an era of new customized products that are easily accessible and investible. Despite these leaps, investors are still unable to create investment portfolios that can optimally meet their requirements. This primarily stems from a misalignment between investor profiles and investment products. So, the first step towards optimal portfolio creation is understanding who the investor is and how the investor wants to invest.
Unique investor profiles
While every investor is unique and has his/her own requirements, in general, investors can be categorized into three main buckets.
· New to market investors: These are investors who have just begun to dip their toes into investments. They usually prefer to start their investment journey with mutual funds and small stock market investments. There are two challenges that these investors usually face. The first challenge is that mutual funds are unable to meet the multiple requirements of investors – this leads to a suboptimal investment experience. The second is that many investors tend to burn their fingers in equities only to eventually shirk equity investments – this can be detrimental to portfolio growth since equities are considered as long-term creators of wealth.
· Dormant investors: These are the investors who have had sub-optimal experiences in their investment journey and are thus skeptical about investing. There are also investors who are unhappy with their current brokers / advisors due to the level and quality and services offered to them and thus, prefer to stay away from them.
· Seasoned investors: These are investors who actively manage their portfolios in an attempt to consistently generate above average returns. However, most of them are unable to beat index returns and are thus, looking for investment products that can enhance overall portfolio returns.
What investors need?
It is evident that each type of investor has a unique risk profile and requirement. For brokers and advisors to improve the level of service to their existing customers and meaningfully engage with new customers, it is important to recognize these emerging imperatives. What investors today need is seamless access to curated portfolios that can help them get the desired exposure within their risk constraints. This can be ably met through products like WealthBaskets. These are curated investment baskets that comprise stocks of companies representing your chosen theme or simply the stocks of a particular index. They offer investors niche exposure, a seamless transacting experience, and complete transparency. For example, a Digital India WealthBasket can give an investor an opportunity to invest in companies that are leveraging innovative digital technology to disrupt the status quo and benefit from the government’s focus on creating a digital India. On the other hand, a defensive momentum basket can optimally capture price trends in an attempt to generate alpha keeping check for market volatility. There are a large number of opportunities and themes that investors can explore through curated investment baskets which are not available through common investment avenues. Thus, the needs of every type of investor can be met through them.
Further, investors can build a diversified investment portfolio and optimise risk-adjusted returns by allocating investments across multiple asset classes. Whether it is gold, debt, equity or ETFs with Balanced asset allocation, curated portfolios can give investors the targeted exposure. Additionally, investors can now access Systematic Smart Beta products which have so far only been available in Western countries.
If you are a broker, then curated investment baskets like WealthBaskets can help you amplify your engagement with your existing and potential clients. You can either create your own curated investment baskets or you can leverage on a range of investment baskets created by expert Registered Investment Advisors (RIAs). On the other hand, if you are an individual investor then you have access to an entire suite of advised wealth products that have so far only been available to high networth individuals. This has created a shampoo sachet moment for the wealth management industry where every individual investor, irrespective of investment value can access investment advice from leading advisors in India. This means, whether you have Rs. 5,000 to invest or Rs. 50,000 to invest, you will still get the best advice available in the market.
Curated investment portfolios democratise the investment ecosystem and ensure that every investor has access to the right investment solutions. With investors able to holistically meet their investment requirements, the entire ecosystem, including brokers, investment advisors, and financial planners, are likely to benefit and grow.
Disclaimer: The views expressed in the article above are those of the authors’ and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.