Let's invest in wine! 😁
And earn money in the process!
Did you know that you can invest in wine, vintage cars and even movies? Or did you know that you could, sitting at home, rent out computers to an IT company and earn returns?
Well, these investment products belong to a category of products called Alternate assets. And they’re quite cool in terms of ROI. I mean, I don’t know of any other debt product that gives 10-15% returns 🤷♂️
But what are alternate assets?
Basically, any product that’s not your typical product like stocks/mutual fund/gold etc is said to be an alternate asset (or alternative asset).
So options like antiques, rare wines, coins, art etc. are alternate assets.
Then, we have another species of financing products that are alternate assets. These have terms like lease financing, invoice discounting, debt financing, P2P lending etc.
Too much jargon? Don’t worry. Five minutes, and you’ll be a pro!
While there are many, many more alternate assets that one can invest in, today, we’ll talk about one of them, discuss how it works, and towards the end of the article I’ll tell you how you can invest in it.
But before that, let’s see what Sayali from Fincocktail suggests about alternate asset classes
Typically, we suggest using the core-satellite method for alternate assets: the core is made up of traditional investment options like stocks, bonds, gold etc and once the core is strong enough, alternate investments could be considered as a part of satellite investments!
So for all those who don’t know, Sayali Rai and Niyati Thaker are the co-founders of Fincocktail, which is a one-stop destination for all things personal finance. They consistently create content across social media platforms with an aim to democratize financial knowledge
They also run a weekly newsletter just like this where they talk about what happened in the finance world recently. I’m linking their newsletter HERE and at the end of this article as well; make sure you subscribe to it and stay updated with finance!
Okay, now let’s look at one important alternate asset class that you can invest in.
Let’s take a hypothetical example of Infosys. Now, an IT giant like Infosys hires about 50,000 freshers every year in their engineering team (Okay wow that’s a lot, but don’t digress please 😛)
Now, all these engineers need laptops. And assuming that even 10% of these laptops will need to be purchased newly, at Rs. 50,000 per laptop, Infosys will need to spend Rs. 25 crores on these bad boys alone.
Instead of putting up 25 crores on laptops, the second option that Infy has is to rent laptops from a third party. (Yeah, we engineers call Infosys “infy”).
But where does Infy find a third party that has 25 crores to spare?
In comes Lease Financing!
You see, today Fintech platforms exist which do this.
They pool in money from investors like you and me, create a separate entity to manage the fund and then buy laptops from that fund.
The fintech then leases out the laptops to Infosys, who will pay a rent (known as lease) to it, which then gets distributed across all the investors.
So if you’re an investor in a lease financing deal, every month you’ll get money from the lease.
Now, the calculations for how the money is distributed are a bit complex, and explaining it will unnecessarily complicate things. But for each kind of deal, there is a payout structure that you can check before you start investing.
The example I gave above is of Infosys leasing laptops. But any company can lease anything else - machinery, land, other equipment etc. The idea is that instead of spending a huge amount of capital, it can simply lease it from someone else and spread the payment across a given duration.
The company has lesser capital expenditure, the investors get an interest on their investment and the fintech earns a commission for facilitating the deal. Win-win-win!
Okay, is it safe?
Well, it has a higher risk compared to regular debt products, but also gives higher returns.
While investing in lease financing, you need to thoroughly check the “lessee” company (Infosys in this case) - check their financials, their well-being, their ability to repay and their brand reputation before investing.
Also, make sure you do a basic sanitation check on the fintech platform that you’re using to invest in these lease financing deals.
Baaki, as Harshad bhai would say, Risk hai toh isk hai 😉
Okay, jokes apart..how do you invest?
There are various platforms that help you invest in lease financing deals. Grip Invest is one such platform. We’ve partnered with them to offer a Rs. 2,000 discount to our subscribers on their first investment. You may check out the link HERE in case you want to explore more! And feel free to write back to me in case you have any queries.
And don’t forget!
Fincocktail’s newsletter is HERE. Make sure you check it out and stay updated on finance every week!