There is no denying the fact that being called a millionaire has a sense of accomplishment. But wait, is the word ‘millionaire’ right? In today’s advanced world, where everything is evolving, the term for a millionaire has evolved as well. An HNI or a High Net Worth individual is the new term derived for a millionaire. A person who has more than a million liquid assets comes under the criteria of an HNI. It has been estimated that the number of high-net-worth individuals in India will rise by 950,000 in 2027.
High-net-worth individuals’ assets are typically liquidated and include items such as fine art and their primary residence. HNIs frequently seek the advice of financial professionals to help them manage their money. Because of their high net worth, these individuals are frequently eligible for additional opportunities and benefits.
Along with having a high net worth, these individuals also have a different way of investing as compared to a common man or retail investor. Statistically speaking, an HNI’s stake in alternative investment ranges up to 50%; on the other hand, it is just 5% for an average investor. Let us understand in detail how an HNI invests differently.
Retail Investors vs HNI: Difference in Investing
There is a vast difference between the investment approaches of a common man and a High Net worth individual. Through a few points, let us understand on what basis an HNI invests differently from a retail investor or a common man.
- Investment size: A major difference between the investing approaches of a retail and an HNI depends upon the size of the investment. For retail investors, investment means investing their savings to get a higher return, and in the Indian market, they own a 6% stake. On the other hand, an HNI with a much higher net worth has the capability to make large investments.
- Risk appetite: As compared to a retail investor or a common man, an HNI has the resources and capacity to incur a loss. As a result of this, they are more comfortable with taking on a high-risk investment. They have the ability to take a risk in the market with the probability of getting an even higher return.
- Investment options: With a high net worth, a pool of resources, and an appetite for risk, a high-net-worth individual has a plethora of investment options. From Alternative investment funds to REITs, there are immense options for an HNI. A retail investor, on the other hand, may stay limited to options that have less risk or money involved. Furthermore, an HNI has more access to exclusive investment opportunities as compared to a retail investor; these may include hedge funds, startups, private equity, or machinery.
- Regulatory requirements: HNIs may face fewer regulatory requirements compared to retail investors. This is because they are often classified as accredited investors, which means they meet certain net worth and income requirements that allow them to invest in more complex and risky investments.
- Knowledge: With a large pool of investments and experience, a high-net-worth individual is bound to have more investment knowledge as compared to a common man. This knowledge is due to the fact that they have more resources available to them to learn about investing, including financial advisors, private bankers, and access to investment research.
- Portfolio diversification: With high-risk investments and immense investment options, a high-net-worth individual often has a more diversified portfolio than a retail investor. This is because an HNI has a larger investment size and can afford to invest in assets that are diverse such as fine art or wine collections.
- Investment goals: While talking about the difference in investing between retail investors and HNIs, one thing that makes a contribution is the investment goals. Retail investors are often known to invest with the goal of long-term wealth and retirement planning. On the other hand, a high net-worth individual has a more different set of complex goals. These may include tax optimization or capital preservation.
The beauty of the Indian investment industry lies in its diverse range of investors. Be it high net-worth individuals, a common man, or a retail investor; each plays a crucial role in the investment market. In summary, while both retail investors and HNIs invest in securities, they differ in terms of investment goals, investment size, investment knowledge, and investment approach. Retail investors tend to have a more traditional investment profile, while HNIs may have more complex investment needs and greater access to a wider range of high returns investment options. If you wish to enhance your knowledge further and learn more about the investment market, or you are looking to invest, your one-stop solution is the Bhive Alts platform.
Your point of view caught my eye and was very interesting. Thanks. I have a question for you.