Dearest Reader,

Let me just come out and say it: networking is a pain in the butt.

However, doing it outdoors, someplace like the beautiful Huntington Beach in California, makes it a lot more bearable.

So, I attended the FutureProof Festival this year again, and it was every bit refreshing! Look at me beaming in the gorgeous, scorching sun! Of course, I returned with a nice tan and a bunch of new learnings.

Now, onto the serious stuff!
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As a financial advisor, I don’t just sit behind my laptop and take client calls or endlessly analyze client portfolio returns (although, I do a ton of that!); I also have fun learning new, exciting, and out-of-the-box ways to grow wealth for my clients. And that’s exactly what I have for you today.

These are 5 strategies that I am using for my clients, who want to move beyond boring mutual funds and large caps!

But before we deep dive, take a deep breath because you are in for some finance jargon!

For starters, let’s get the basics out of the way.

Basic Terms You Need to Know

• Index Funds: An index fund is a type of mutual or exchange-traded fund (ETF) that tracks and mimics the performance of a market index, such as the S&P 500, by holding the same stocks or bonds or a representative sample of them over a period of time.
• ETFs: ETFs are also funds that trade on stock exchanges, much like individual stocks. They offer investors a way to buy a basket of securities in a single transaction. ETFs can track various assets, including stocks, bonds, commodities, or currencies, and can be both actively and passively managed.
• Bull Market: A bull market is the term used to describe a financial market in which prices are rising or are expected to rise, thus displaying investor optimism.
• Bear Market: A Bear market is the opposite of the bull market. It is a trend that is characterized by falling prices and investor pessimism. The terms "bull" and "bear" are believed to come from the way these animals attack their opponents.

5 Investment Strategies You Need To Try

1. Buffer ETFs

What are Buffer ETFs? ​
Buffer exchange-traded funds offer investors a cushion against market losses, provided they are willing to accept a cap on their profits. This type of ETF is suitable for investors who want stock-like gains while limiting losses due to market volatility. As you may have understood, the tradeoff for the protection is the acceptance of a limit on potential gains.

What are the benefits?
​Buffer ETFs can play a powerful role in an immigrant’s financial portfolio because they:

• Enhance yield potential
• Ensure diversification
• Limits unforeseen losses

Who are they for?
People who want to participate in the market but want to limit their downside. Generally used by beginners and intermediate investors with low-risk capacity.
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What are the downsides?
​The major risk to Buffer ETFs lies in the extremes. For instance, if the market is having a bull run or going straight up, these ETFs will not enjoy gains beyond a cap. Similarly, if the market is selling or is bearish, there might be exposure to open-ended losses.

Data Trends: As of August 2024, there were 327 buffer ETFs, representing more than a whopping $54.8 billion in assets. This asset type is on the rise, and investors are betting big for reasons like enhanced income, liquidity, lower fees, transparency, and tax efficiency.

2. Covered Call ETFS

What are Covered Call ETFs? ​
Like other ETFs, covered call ETFs work by owning stocks and then selling the right to someone else to buy those stocks at a certain price in the future. In exchange for that right, you get paid a little extra money. Investors can use this ETF to diversify their portfolios.

What are the benefits?

• Reduced market volatility
• Income generation
• Tax efficiency

Who are they for?
I am often asked, “How can I generate income from my portfolio?” Folks who are not well-versed with options and want to generate income can look into these ETFs. It’s also suitable for those who want a hedge against market volatility.

What are the downsides?
​Again, the primary downside is the opportunity cost. The strategy will limit the ETF's participation in significant market upswings. Similarly, if the market experiences a sharp and sustained decline, the downside protection provided by the covered call strategy may not fully offset losses.

Data Trends: According to recent data, with 349 ETFs traded on the U.S. markets, Covered Calls ETFs have total assets under management of $71.75 billion.

3. Exchange Funds

What are Exchange Funds? ​
Exchange funds, also called swap funds, are an arrangement between concentrated shareholders of different companies that pool shares and allow investors to exchange their large holding of a single stock for units in the entire pool's portfolio. In this case, each investor receives a pro-rated share of the exchange fund, thus leading to healthy diversification.

What are the benefits?

• Investment diversification
• Tax-Deferral Benefits

Who are they for?
People who have huge stock concentration and wish to diversify their otherwise restricted holdings.

What are the downsides?
​Exchange funds may require participants to have minimum liquidity (to the tune of $5 million) to join and contribute. Another limitation is that investors need to be locked in for a minimum of 7 years, which could be an issue for short-medium-term folks.

Data Trends: ETFs are increasingly gaining a share of all funds volume across the US and Europe, with growth at 16% per annum (p.a.) from 2016-2022, according to research. This growth far exceeds mutual funds, which have been growing at 5% p.a. over the same period. There’s more! In 2022, an estimated 70% of new fund launches were ETFs. Here’s a visual representation.

4. Debt Management Platforms

What are Debt Management platforms? ​
Buying a home and paying for college are two of the biggest expenses that clients experience over their lifetimes. While not a typical instrument, debt management platforms allow investors (and their advisors) to monitor their debt portfolio and look closely at the market for any loan opportunities that arise and automatically refinance them.

What are the benefits?

• Lowering Current Debt
• Refinancing Loans against other assets

Who are they for?
Folks who have debt on their balance sheets and/or want a quick line of credit to borrow against.
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This is where I step in as an advisor for all my clients! At CapitalWe, we have tools that let us monitor your debt and allow you to refinance if you want. It also lets me quickly look at rates for borrowing against your home (HELOC) or stock (SBLOCs). This is also helpful for clients who have a high net worth but wish to have liquidity.

What are the downsides?
​Sometimes the choice to refinance or borrow might not be worth the effort and cost. Additionally, if you just want to be debt-free, taking on new debt just pushes the clock back on that goal.
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​Data Trends: Checkout platforms like Sora Finance and RenoFi.
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5. Direct Indexing

What is Direct Indexing?​
Direct indexing involves buying the individual stocks that make up an index, in the same weights as the index. In short, your investment manager will replicate an existing stock index, such as the S&P 500, for you, and may even customize it based on your financial goals.

What are the benefits?

• Individual customization
• Greater Autonomy over Index Holdings
• Tax-loss harvesting

Who are they for?
People who have RSUs (Restricted Stock Units) and are looking to divest or invest in the broad market without additional exposure to the company.

What are the downsides?
​It’s hard to manage all stock directly by yourself. Maintaining the portfolio, tracking it, and taking timely buy and sell decisions mean that you need to be at the top of your investment game. This is also where your financial advisor can step in and save the day for you.

Data Trends: According to research, the total assets under management for direct indexing strategies will exceed $800 billion by 2026 from $462 billion in 2022. Direct indexing is expected to grow faster than ETFs, mutual funds, and separately managed accounts (SMA) over the next 5 years.

That’s all, folks!

While I understand some of these terms and instruments might be new for you, your advisor will already have a hang of them and can suggest ones that will fit your long-term goals well. I’d recommend having an end-of-the-year sit down with a financial planner, to see if your strategy is aligned with where you want to go in the long term!

Finally, if you are setting or updating your investment goals, I’d love to help. You can book a free chat here, as and when you get over the Diwali and Halloween celebrations (or the elections)!

That’s all for today.

See you in two weeks!
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​​P.S.: Before you move on to the buzz of Instagram reels, feel free to ping me your burning questions. I will respond on my weekly Ask-Me-Anything Fridays on LinkedIn.

Fun Corners of the Internet

• How do you develop good taste? Why is it important? In this video, Shreyas Doshi, a product management veteran, shares his insights on how to build taste while keeping other people’s opinions at bay!
• I love a good roast. But when folks roast techies in India? It’s phenomenal!

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Whenever you're ready, here are 2 ways I can help you:

• If you're looking for support with your finances, you can start a (free) conversation with me to see how I can help. Here is my calendar for a FREE 30 minute consultation

• Not ready to commit? Email me your questions and I am happy to if I can get them answered in future editions of this newsletter.