Get High on Wine Tasting 

In India, HNIs and connoisseurs have been investing in wine for years now. And in many cases, tidy packets of money has been made if invested with due diligence, knowledge and care.

You like wine and hence you think you should invest in it too?
Not a good enough reason. But if you still go ahead, be prepared for a long-term investing deal; the longer you wait, the higher the chances of good returns because of the way wine-investing works.

For any wine investor, the keywords are: “They are far too valuable and mean too much to me – I’d never sell them.” This is the kind of attitude that every wine-investor needs to build into their investment psyche.

Buy the bottles of selected wines and hold them. Like Fine Art, wine investments typically has a medium-to-long-term investment horizon. It is important to hold your investment for the long term, but what’s more important is the year of investment. An investor should know when to hit an opportunity and make an investment.

Also, if you are investing for the long term, then for every short-term wine requirement, your portfolio is not the ‘right cuisine to serve yourself’!! Don’t drink a few bottles along the way 🙂

Exposure to different varieties of wine is important for proper diversification of your wine portfolio. This helps the portfolio grow in a balanced way.

Beware of spoilage and breakage: If you are investing in high-risk products like Wine, you need to be sure to protect your investment zealously.

How do you really know what a bottle is worth now and what it will be worth in the future? Do your research and read a lot before you venture into such an exotic investing avenue.

(Contributed by Ayushi Gupta, Associate Financial Planner, Team Arjun, Hum Fauji Initiatives)

Should you invest in market linked debentures (MLD)?

Before answering this question, we should first understand what these debentures are and whether they are appropriate for us.

Market Linked Debentures (MLDs), a recent rage, are non-convertible debentures issued by corporates whose net worth is at least Rs 100 crores. These debentures replicate the returns of the underlying index. The underlying index can be an equity index, government security index, gold index or something else. There is typically a minimum ticket size of Rs 10 lakhs per bond and the purchase of these bonds could be in lots generally of 5 bonds or more depending upon the issuing entity. There is generally a lock-in period of 1 to 5 years.

The investor can sell the MLD before maturity in the secondary market technically, though there may not be enough buyers to make a sale.

There is no regular fixed income in MLD. The principal and interest amount are payable on maturity. The main aim of MLD is capital protection while giving returns as per the benchmark set for that MLD. The issuer gives a guarantee of paying the 100% principal amount in the worst case scenario.

MLDs could have significant tax benefits if there is a profit on maturity. If you sell these debentures after 1 year of purchase, the capital gains will be taxed at 10% only.

So, what is the downside of investing in MLDs?

Credit Risk: There is a danger of default since the issuer’s ability to pay the investment could become weak over time.
Liquidity Risk: It may not be easy to sell a particular MLD on secondary market due to lack of buyers, even though they could be listed there officially.
No capital appreciation: MLDs are marketed as safe instruments. But they are safe to the extent of not losing your principal. But the benchmark(s) they are linked to could be volatile, complicated or risky, and you may not gain anything even after years of being invested in a MLD.

Our advice to retail investors is to stay away from MLD investments in general because they could be risky and require large investment amounts. Still if going ahead, we recommend a maximum of 5-10 percent of overall corpus investments in MLDs after being very sure that their personal risk tolerance permits such an investment avenue.

(Contributed by Shaheen Akhtar, Associate Financial Planner, Team Prithvi, Hum Fauji Initiatives)

Interested in knowing more about Market Linked Debentures. Speak to an expert now?

Children don’t listen to parents but still copy them…!!     

When a young mother asked Aristotle when should she start training her one-year-old child, Aristotle said, “Hurry back home, you are already 5 years late.”

Parents have a deep impact on their children through their verbal and non-verbal communications. Decide the qualities that are most important to you, such as honesty and hard work and act the way you would want your children to act. If you want your child to eat fruits and vegetables, then you should eat them too.

Unknowingly, we are sometimes responsible for ruining the future of our children.
Wondering how?
From infancy onwards, we give the child everything she wants. With all her needs fulfilled easily, she grows up to believe that the world owes her a living. We don’t give the children any spiritual or social training, waiting till she is 21 and then letting her decide for herself. The decision could be flawed when the inputs have been inadequate or incorrect.

Money is not everything, but it’s an important means for fulfilling our responsibilities. Children should be taught about the value of money, investing etc from an early age. You can only teach if you yourself are practicing it. Spend quality time with your children themed around money discussions. Eventually, your children will start following you. Take your child along with you for your morning walks, Sabji mandi trips, bank, temple, family doctor, financial advisor, and more. When they experience the real world with you as the guide, they will become real rather than remain in the make-believe world of smartphones and virtuality.

If this is done zealously, you would’ve fulfilled your most important duty of grooming your children to be socially and financially confident adults.

(Contributed by Jatin Uppal, Deputy Manager, Hum Fauji Initiatives)

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