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How to simplify debt, equity plus real estate portfolio?

Post author:Yash Sharma
Post published:30/09/2022
Post category:Alternate Investment / FAQs / Others
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Simplifying debt, equity plus real estate portfolio

Are you a salaried person , 25-35 years old , having 2-20 Lakhs in bank account and struggling on where to invest. Let’s look at Investing ideas simplified at the cost of “Oversimplification”

Looking for investing fun, even I only own 1 of these 3 , can you guess which one –

1) Debt ETF FoF

Yes you heard it right, FD equivalent ETF/funds also exist . Which gives live interest rate for different maturity dates. So match your investment horizon with the maturity date of fund, check interest rate (called YTM) and invest .

Just remember if you invest for more than 3 years (2025 and beyond), your effective tax on gains will fall to almost 10% vs typical 30%+ in FDs . Today 6 month maturity Debt ETF is offering a crazy 7% rate. And yes, you can withdraw before maturity, just don’t ask me what will be return in that scenario, its complicated. You can buy these like any other Mutual fund from apps like Coin, PayTM Money etc

2) REITs

Do you crib about your house rent skyrocketing post covid . On a 1 cr worth flat , owner still makes only net 1.5-2.5 Lakhs per year . But if a company rents an office space worth 1 cr , they pay rent of 6-8 Lakhs per year. But office buildings are huge and require huge capital to build or own. That’s where REITs come into the picture where Grade A office properties are unitized and one can become partial owners of these properties starting at minimum ticket of Rs 300.

You can expect ~6% yield payable on quarterly basis. Cherry on the top is that large part of these distribution is “tax free” which is a rarely heard in India nowadays. These shares are listed on the exchange and the prices are normally much more stable thus reducing chances of seeing a sharp fall on your acquisition price. And just like your landlord , rentals here also will keep increasing by ~5% every year so expect higher distributions every year. Next time buy a Rs 300 Starbucks coffee to your landlord who is renting you only at 2% yield and tell him about REITs. You can buy this from your brokerage account like ICICI Sec , Kotak Sec, Zerodha etc . There are 3 REITs currently listed in India- Embassy (BLR), Mindspace (Pune, Mum, Hyd) and Brookefield (Kol ,Ggm). You can buy the one whose IPL team you support 😛

3) Nifty 50 ETF

Nifty 50 ETF means buying the top 50 most valuable listed companies in India in a weighted proportion of their size. Historically if held for 10 years, in most occasions this would have given more than 10% annualized return irrespective of time of entry . Basis anecdotal experience I can tell you , more than 3/4th investor portfolios deliver lesser returns than someone who would put everything in this ETF . But where’s the fun in that . Similarly S&P 500 ETF for US stocks. Build positions in a gradual manner in this one as it can be volatile. If you are adamant on buying stocks , in the beginning stick to companies which you see in real life.

Also Read: Debt Instruments – Overview, Examples, Advantages & Disadvantages