TomorrowMakers ™

How do Indian celebrities invest?

18 April 2016
It may appear that Indian celebrities make money only from their main occupation and multiple advertisements, never having to explore other investment avenues. But is that really true?
 
 

Where previously the only source of income for celebrities was the fee received from their performances, and investments were more conservative fixed deposits and gold, things have changed quite dramatically in the past few years.But are there any tips we can learn from super successful celebrities? Are there any trends we can cash in on? Let’s find out.

#1: Investing in a business:

Some of Bollywood’s top actors such as Shahrukh Khan and Salman Khan have their own production houses. Because this means that their own stake in the movie’s success increases, they also seek customised insurance covers worth crores for protecting the movie sets and equipment.  Then, there are other actors who invest in unrelated businesses such as restaurants, fitness studios or spas. For example, Sachin Tendulkar owns the wildly popular Tendulkar’s World in Mumbai.

Related: Lessons on investing from creating a cricket dream team

#2: Start-ups:

Of late, there has been a boom in the Indian start-up space and surprisingly, the high risk return equation in case of start-up investments has not deterred celebrities from investing in this space. For example, Salman Khan and Amitabh Bachchan did an ad-for-equity deal with yatra.com and justdial.com, John Abraham invested in couple of food start-ups, Kareena Kapoor invested in a baby care portal, etc.

Related: Investment options – thinking beyond the obvious

#3: Tax-Free Bonds:

In the past 2-3 years, quite a few public sector undertakings have come up with tax-free bonds. Given the negligible credit risk and assured tax-free returns over a long term horizon of 15-20 years, this investment avenue has become an instant hit with Indian celebrities. According to media reports, actors such as Aamir Khan, Akshay Kumar, Kareena and Karishma Kapoor have invested heavily in Tax-free bonds sold by the Indian Railways Finance Corp (IRFC).

Related: Things you didn't know about tax savings [Infographic]

#4: Real Estate:

Though there is a fad every now and then, real estate has been an evergreen and very popular investment avenue for all celebrities. Actors generally purchase luxury properties in Mumbai & given the RBI’s relaxed norms on investing outside India through the Liberalised Remittance Scheme (LRS), some have even bought properties in foreign markets, especially in UAE and the UK. For example, Abhishek and Aishwariya Rai Bachchan have acquired a luxurious property in Dubai's Jumeirah's Golf Estates which is rumoured to be priced between 15 to 35 million UAE Dirhams.

Related: 6 compelling reasons why you need home insurance

As an investor, what you should know

Some investors make the mistake of trying to mimic the investment style of their favourite celebrities & this can prove disastrous for their finances because the investment profile of a celebrity can be completely different from that of other investors. Following are some of the major differences:

  • Celebrities often face the rick of short lived but very lucrative careers, which requires them to invest in avenues that give a recurring income stream that allows them to continue the same lifestyle even when they are not employed.
  • When it comes to seeking advice, celebrities have dedicated wealth managers and family offices assisting them where the focus is usually not long term planning, but increasing their “net worth”.
  • The income levels of celebrities fluctuate highly w.r.t. the brand equity they command in people’s hearts.
  • Instead of financial planning, celebrities need “wealth management” which is a completely different ballgame geared more towards “returns” than asset allocation, systematic saving etc.

Related: What do Guru, Titanic and The Wolf of Wall Street teach us about money?

In recent years, with many new investment options opening up, celebrities have made smart decisions to diversify their portfolios, with some of them being a touch bolder than others. However, as an investor, you must not imitate their investment styles without doing due diligence to find out your own priorities and goals.

 

 
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