Why investors should consider these five alternatives to SME IPOs

When it comes to growing wealth, exploring diverse investment options is crucial, especially in a landscape where SME IPOs can be unpredictable. While SME IPOs may attract attention for their potential high returns, alternatives like mutual funds, stocks, ETFs, real estate, and REITs offer compelling benefits that can enhance financial security and long-term growth. Each investment avenue provides unique advantages, from professional management and diversification in mutual funds to the direct ownership of stocks and the income potential of REITs. Understanding these options can empower investors to make informed decisions that align with their financial goals and risk tolerance.

Investment Options Beyond SME IPOs

Mutual Funds

Mutual funds offer a safer and more accessible way to build wealth than SME IPOs. According to Jitendra Sikligar from MySIPonline, the Indian mutual fund industry has seen impressive growth, with assets under management reaching ₹46.37 trillion in March 2023, a 21% increase from the previous year. Equity mutual funds, particularly large-cap and multi-cap funds, have consistently delivered 12-15% returns annually over the past decade. A monthly SIP of ₹10,000 in a fund yielding 12% can grow to over ₹1 crore in 20 years. With a wide range of funds catering to different risk profiles, mutual funds can also include debt and thematic options, making them a flexible investment choice.

ETFs

Passive funds and ETFs provide a low-cost investment option by tracking significant indices like the Nifty 50 or Sensex. "With assets under management surpassing ₹7 trillion in 2023, these funds are popular among cost-conscious investors. Expense ratios for ETFs vary, with some actively managed funds costing more. Regular portfolio rebalancing is necessary to adapt to market changes. Overall, ETFs and mutual funds present a more stable way to grow wealth compared to the volatility of SME IPOs," said Jitendra Sikligar

REITs

Real Estate Investment Trusts (REITs) offer a promising investment alternative. "Since their introduction in 2019, Indian REITs have shown solid growth, with the Embassy Office Parks REIT returning over 20% since its listing. One of their main attractions is the requirement to distribute 90% of net cash flow to unitholders, ensuring a steady income stream. This makes REITs particularly appealing in India, where direct real estate investments typically yield only 2-3% in rental income. Long-term, REITs can provide both dividends and capital appreciation," said LC Mittal of Motia Group.

Real Estate

Aman Gupta from RPS Group discusses the potential of Indian real estate as a vital investment avenue. The sector, valued at $200 billion in 2021, is projected to reach $1 trillion by 2030. Residential sales have surged post-pandemic, with top cities seeing a 71% year-on-year increase in 2021. Cities like Hyderabad and Bengaluru are experiencing significant price growth, particularly in premium areas. The commercial real estate market also offers attractive rental yields, especially in IT hubs, driven by strong demand.

Startup Investments

Siddharth Maurya emphasises the exciting opportunities in angel investing within India's booming startup ecosystem. With 23 new unicorns in 2022, platforms like LetsVenture allow investors to enter high-growth sectors like fintech and health tech with as little as ₹5 lakh. While these investments can yield high returns, they also come with increased risk, making them suitable for those who navigate the startup landscape.

These alternatives to SME IPOs provide a range of options for investors looking to grow their wealth in diverse and potentially lucrative markets.

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Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.