Is debt against shares and mutual funds good for investors?

The capital market is currently one of the most preferred investment avenues in India due to its long term wealth creation factor and higher interest rates as compared to traditional schemes. provide incentives such as Dividend, Bonus issues, and stock splits among others. They are cheap with promising returns on short and long term basis. Sure, they are driven by emotion but over the long term, the capital market has been seen as a successful example of getting a higher return on your investment.

According to Finsire data, Indian households invest 49.4% in property, 15.1% in bank deposits, 15% in gold, 6.2% in investments. insurance Fund, 5.7% in mutual funds and 4.8% in equities.

With the adoption of more advanced technology with stocks, mutual funds, bonds and insurance, investors can use them as additional collateral for other purchases. Some financial institutions currently offer loans against shares and mutual funds facilities to investors.

Shreyans Nahar, CEO & Co-Founder, Fincyre said, “India is an asset-rich but liquidity-poor country. Liquidity comes from unlocking assets in exchange for a specific market value for the assets. This is where secured credit exists comes in. Secured credit organically builds the economy.

Elaborating, Nahar said, historically, Indians prefer loans secured with home, agriculture land, gold and vehicle loans. Almost by net value, secured loans have always constituted over 70-75% of the Indian lending ecosystem.

As digitization progresses in ecosystem ease-of-use, Nahar believes that consumers expect easy access to digital assets across every digital touch point to take credit.

Data from Finsire has revealed that the total wealth held by Indians today is $10.7 trillion. Nevertheless, $3 trillion of digitizable assets are held by brokers and asset originators.

They believe that over time stocks, mutual funds, bonds and insurance become prevalent and viable in the ecosystem as APIs become more digitized, allowing users to pledge, take credit on them and sometimes provide them with additional collateral. Will find more avenues to use as. other purchases.

According to FinSire CEO taking loan against shares and mutual funds has a lot of benefits for both lenders and asset holders. these:

Investors and Users:

Convenience: Technology has changed the lives of individuals starting with convenience. Pledge and de-pledge for these digital assets at various touchpoints makes it easier to avail credit as compared to applying for a loan from a bank or taking a personal loan with various documentary proofs.

Decentralization of mortgages: Previously, secured loans required users to find lenders; Now, they can do this either on and off their respective brokers; As APIs increase scalability, they can receive credits across the various digital platforms they use on a daily basis.

Loan terms: Secured loans usually have better terms, interest rates go below 10.5%, LTV increases as more assets are digitized, mortgaged, and the loan term is linked to the longevity of the asset or maturity and at convenient repayments.

Leverage: Most long-term holdings, in the form of stocks and mutual funds, sit in brokers’ databases and serve the one-dimensional objective of delivering returns to investors. Today, users can continue to own assets and avail easy access to credit.

Lenders:

Transparency: As assets are digitized, it is no longer mortgaged hard assets like gold, land, or vehicles that can be bogged down in the system with counterfeits. Most digital assets are transparent with their associated data.

Risk mitigation by combining assets on a capital stack: Combining multiple assets on a single capital stack provides lenders with more collateral and reduced volatility compared to a single asset.

“The push from mutual funds and equities will soon force other difficult and non-digitizable assets to be digitized by various asset promoters today,” Nahar said.

In conclusion, he added, “over the next few years, India will unlock its net asset potential by digitizing assets on a large scale.”

Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.