The Evolution Of Money

How Should Retail Investors Create A New Age Portfolio?

Considering cryptos, NFTs and emerging ESG

by Edul Patel

Mr. Patel is founder and CEO of Mudrex, a cryptocurrency market aimed at the advisor channel. Visit https://mudrex.com/.

In the last decade, advances in financial technology have given rise to new and exciting investment options accessible to more investors than ever. While high net-worth individuals have historically had greater access to innovations in fintech, these same doors have also opened for retail investors.

Now that they have, what should investors know?

At its core, every portfolio is formed to withstand different market cycles, such as today’s crypto retrenchment. Traditional strategies must be applied to new asset classes as part of a balanced portfolio mix, including digital assets, stocks, fixed deposits, corporate bonds, gold, and real estate.

Three considerations should be top of mind when formulating today’s investment portfolio:

1. The Investors’ Age and Risk Profile: The investor’s age will play a significant role in portfolio allocation and the investors’ unique risk profile.

2. Emergency Savings: An emergency fund is crucial to offset portfolio and market risk. All markets go through cycles. Emergency funds help investors navigate through bear cycles with confidence.

3. Portfolio Composition: With the plethora of options available to create a new-age portfolio, making a balanced portfolio may seem daunting. But maintaining a healthy mix of aggressive, conservative, and liquid assets and strategies is essential to long-term investment success.

Beyond the conventional asset classes, what assets comprise a new-age portfolio?

Consider Cryptocurrencies

Cryptocurrencies have been one of the most talked-about asset classes over the past couple of years. Investment banks like Goldman Sachs and Barclays that initially shied away from crypto are now embracing crypto assets. The rapid growth of this sector has seen several crypto exchanges and investment management companies emerge, catering to clients around the globe.

As the sector continues to mature, a new-age portfolio can and should include a curated crypto basket with specific themes covering different sectors within the crypto ecosystem. Think of it as a portfolio within a portfolio...

As the sector continues to mature, a new-age portfolio can and should include a curated crypto basket with specific themes covering different sectors within the crypto ecosystem. Think of it as a portfolio within a portfolio.

Don’t Neglect NFTs

Non-fungible tokens, or NFTs, recently saw a massive bull market. These are digital representations of anything conceived to have value. For instance, a music album, art or videos can be NFTs. Stored on the blockchain, an NFT is a tokenized form of anything that the ingenuity of the NFT creator can only limit. Since these are still in the price discovery mode, they are subject to very high volatility.

Evaluate The Importance Of ESG Investing

ESG stands for environmental, social and governance impact. Although this is not a separate asset class (more of a sector), it plays a crucial role in any new-age portfolio. Investors prefer to invest in businesses that respect environmental, social, and governance initiatives. There are usually stringent criteria for stocks, funds and other assets to qualify for ESG portfolios. Investors who believe in the respective ESG category expect to receive dividends for investing in that category. Interestingly, for example, several crypto projects are working to build carbon-neutral and sustainable businesses.

Real Estate Investment Trusts (REITs)

Real estate investment opportunities, such as REITs, have traditionally been accessible to only high-net-worth individuals. However, a recent paradigm shift has ushered more retail investors into this asset class. REITs are investment companies that directly own real estate or have a share in the income of real estate properties. Think real estate, but tokenized, meaning more investors, both institutional and retail, are now able to participate.

A typical new-age portfolio usually has exposure to some or all of the assets mentioned above classes. Although some portfolio components such as real estate or themed crypto baskets were previously available to a select few, investors now have greater access and options than ever.

Innovation has enabled investors to create new portfolios that minimize the risk while maximizing the return. In its true essence, the new-age portfolio is more sophisticated while at the same time more accessible to all classes of investors. It is a true synergy of innovation, tech and finance.