Four investment ideas Smallcase founder Vasant Kamath is bullish on this

cryptocurrency New exposure ruled sentiment as investors looked to diversify. A new credit instrument – Buy Now Pay Later (BNPL) – has brought relief to people with financial stress induced by COVID.

Here are some of the latest trends that are likely to take the money industry by storm in the new financial year.

indexing

As new asset classes gain momentum and visibility, it makes sense to take an indexing approach to the many new trends emerging in trading. Indexing as an investment strategy, that is; Investing in index ETFs and mutual funds is considered the right financial approach. For example, if there was an index (mcap, top 10, etc) for crypto/nft, it is easier for the average investor to take a risk than to choose the right crypto coins or nfts.

As a passive investment strategy that mimics returns from a benchmark index, index investing comes with a lot of benefits. Compared to actively managed strategies, indexing provides more diversification. The success of indexing as a strategy has already been played out globally as index funds/ETFs have more assets in the US. This was seen in domestic equities in India last year. According to a report by the Association of Mutual Funds in India (AMFI), the number of folios in index funds has grown to nearly 2 million, which is more than double what it was a year ago.

Indexing for both established and emerging assets will be the gateway for new investors to start taking exposure, and will eventually lead to better decision-making and allocation to many of those specific components. It also helps in maintaining the asset allocation in a simple and transparent manner.

Given the current volatility in the market, investors should look at the asset allocation framework. The market (eg Nifty) has gone down 5% in the last 6 months, gold (eg Gold ETFs) has gone up 11%. To maintain allocation to different asset classes as part of the framework, investors may invest more in equities as its proportion in their portfolios would have decreased. They can do this by cashing out appropriate percentages from their new incoming cash flows or from other asset classes for investors who are not looking to diversify their portfolios, and allocate them to other asset classes, including fixed income, gold. A good exercise to start doing.

capital market infrastructure

Capital market infrastructure institutions, which include supporters of the capital market, have become increasingly important over the years.

CMIPs (Capital Market Infrastructure Providers) include interdealer brokers, information services, trading venues, technology providers, clearing houses, servicing firms and securities depositories. Examples of Exchanges (NSE/BSE), Depositories (CDSL/NSDL), RTAs (CAMS/Kfintech), APIs and Platforms such as BSE Star MF, Smallcase Publishers and Gateway.

CMIP enables capital market participants such as brokers, asset and investment managers, advisors, distributors and wealth managers to conduct their businesses efficiently, while allowing them to grow with ease with technology. It is linked to two megatrends, the financialization of savings and globally linked financial markets. As new assets (such as fixed income/bonds, crypto, ETFs and real estate) become transactable to individual investors, this role becomes more and more important. Business becomes easier as CMIPs leverage aggregated data for better decision making, analysis and transparency. New technology and user experience work across the spectrum.

social investment

The future of investing will be social. More inclusive formats are crucial for the next 100 million Indians to embark on their investment journey. As material gains ground for greater collaboration, discussion, and actionable investment decisions, investment behavior will move towards becoming more social. Personal finance discussions are becoming more transparent about money, valuation, personal wealth and are no longer seen as taboo or private, closed-group discussions. This trend has also been helped by the increasing penetration of high-speed internet across India.

With the new, digital India becoming the vehicle for a massive explosion of content generated by both users and developers in the vertical, personal finance is no exception to the rule. With a significant increase in platforms for discussions and dialogues as well as building communities, retail investors have found their niche. Investors are using social circles to collaborate for feedback on discussions on benchmarks on their portfolio and personal finance goals.

membership economy

The subscription economy stands for a new consumption landscape where companies with the traditional pay-per-product (or service) model are moving towards a subscription-based mode. What was once considered a slow-moving phenomenon has begun to erupt in the past two years. The subscription has crossed the 50 million user base barrier and continues to grow rapidly.

However, there has been a steady and explosive growth in the consumption and spending power of Indians, where consumption matters not only of transactions, but of periodic and regular use as well. These consumption use-cases have been helped structurally by the credit card boom as well as the UPI autopay facility. The subscription economy gives the consumer access to diverse and diverse options as the business does not want to convert into a customer nor do they want to make a sale. Like the end user continues to get more for the same price.

We expect these ideas to become mainstream and more prevalent this year.

Vasant Kamath is the founder and CEO of Smallcase