5 Fixed Deposit Alternatives | Upto 20% Returns | Alternative Investments for Regular Income

Summary

In this video, the host explores five alternative investment products offering pre-tax returns from 11% to 20%, unrelated to the stock market. These include the 12% club, a P2P lending platform; fractional real estate investments with platforms like Strata; asset leasing through Grip Invest; senior secured bonds on Wint Wealth; and invoice discounting via KredX. The host evaluates each for potential inclusion in a fixed income portfolio, considering returns, risks, collateral, lock-in periods, and liquidity.

Takeaways

• 📈 The script discusses 5 alternative investment products offering pre-tax returns from 11% to 20%, which are not linked to the stock market and are seen as alternatives to fixed income products.
• 🤔 The author expresses curiosity about the '12% club' and its alternative investment products, seeking to understand if they belong in their own fixed income portfolio.
• 🏦 The '12% club' is described as a tech platform that partners with NBFC P2P lenders, acting as a sourcing partner without guaranteeing returns, and operates in the middle of borrowers and lenders.
• 📊 Peer-to-peer (P2P) lending platforms offer a range of interest rates for both lenders and borrowers, with a net pre-tax yield expectation of 7.5% to 10%, and a risk of borrower default.
• 🏢 Fractional real estate investment involves collective ownership of commercial properties through platforms like Strata and PropShare, with potential IRRs of 13% to 18% over 5-6 years.
• 🚗 Asset leasing is another alternative investment where platforms like Grip Invest or Jiraaf connect retail investors with companies looking to lease assets, offering up to 21% pre-tax IRR.
• 💼 The concept of secured bonds, such as those offered by Wint Wealth, involves investing in bonds backed by collateral and with senior repayment priority, promising returns of around 9.25%.
• 📑 Invoice discounting is a short-term investment opportunity where platforms like KredX allow retail investors to participate in purchasing receivables at a discount, with returns in the range of 11% to 13%.
• 🛡 The risks associated with these alternative investments include credit risk, liquidity risk, fraud risk, and market risk, especially in the case of market-linked debentures (MLDs).
• 💡 The author suggests a cautious approach to these investments, recommending due diligence, small initial investments, and diversification to mitigate risk.
• 📈 The author concludes by considering the inclusion of some of these alternative investments in a 'satellite fixed income portfolio' alongside traditional fixed income assets.

Q & A

What is the 12% club mentioned in the video script?

The 12% club is a tech platform that deploys money with its NBFC P2P partners and facilitates borrowing from them. It acts as a sourcing partner and does not guarantee any returns on investment.

How does a P2P lending platform like the 12% club operate?

A P2P lending platform operates by matching borrowers and lenders within their desired risk-return profile, offering features like annual interest rates of 9 to 12%, no lock-ins, and low initial deposit amounts.

What is the expected net pre-tax yield for lenders on P2P platforms according to the Liquiloans website?

The Liquiloans website states that lenders can expect a net pre-tax yield ranging from 7.5% to 10% on their net invested amount.

What are the major risks associated with P2P lending?

The major risks in P2P lending include borrower default, which is typically quoted at a default rate of 3 to 6%, and the potential for mixed results as experienced by the speaker's relative.

What is fractional real estate investment?

Fractional real estate investment is a concept where investors come together to collectively own a commercial property, with each investor being a fractional owner and platforms like Strata and PropShare facilitating the process.

How do platforms like Strata and PropShare facilitate fractional real estate investment?

These platforms create a special purpose vehicle (SPV), pool investor money to buy the property in the SPV's name, and make each investor a shareholder in the SPV, distributing rental income proportionately.

What is the typical minimum investment required for fractional real estate platforms?

Most fractional real estate platforms require a minimum investment of 20 lakhs, which is a significant amount and not easily accessible for all investors.

What are the risks associated with investing in fractional real estate?

Risks include the lack of a specific regulatory framework, challenges with occupancy rates affecting rental yields, and liquidity issues due to the absence of a well-developed secondary market.

What is asset leasing and how do platforms like Grip Invest or Jiraaf facilitate it?

Asset leasing is a contractual agreement for the use of an asset, where a lessee uses the asset and pays the lessor regularly. Platforms like Grip Invest or Jiraaf act as intermediaries between retail investors and companies wanting to lease assets, pooling investor money to purchase assets and lease them out.

What returns do platforms like Grip Invest or Jiraaf offer investors in asset leasing?

These platforms offer investors returns of up to 21% in IRR on a pre-tax basis, with leases generally running for a 2 to 3 year period.

What are the risks associated with asset leasing investments?

Risks include the lessee not making payments on time, the resale value of the asset being insufficient to compensate the investor, and the potential for fraud without a regulatory framework.

What is a senior secured bond and how does it offer security to investors?

A senior secured bond is a type of bond backed by collateral, such as property or assets, and 'senior' indicates that bondholders have a higher priority to be repaid in case of default, offering two layers of security.

What is the potential return and risk associated with the SK Finance senior secured bond offered by Wint Wealth?

The SK Finance senior secured bond offers a potential XIRR of 9.25%. Risks include credit risk, liquidity risk, fraud risk, and market risk associated with MLDs or market-linked debentures.

What is invoice discounting and how do platforms like KredX and Jiraaf enable retail investors to participate?

Invoice discounting is the process where a bank or NBFC purchases receivables at a discount and provides upfront cash to the vendor. Platforms like KredX and Jiraaf fractionalize this opportunity, allowing retail investors to invest with as little as 50,000 rupees.

What returns can investors expect from invoice discounting through platforms like KredX?

Investors can expect pre-tax IRRs of 11 to 13% with tenures ranging from 30 to 90 days in invoice discounting.

What are the risks associated with invoice discounting investments?

Risks include credit risk, as the investment is usually unsecured, and liquidity concerns due to the absence of a secondary market for invoice discounting.