Leveraging Innovation To Boost Your Portfolio?

Updated on: 10 April 2023 9:46 am

Shalab Gupta Bibhab, Founder, Bibhab Capital

Most investors are always on the lookout for new and under-utilised opportunities, especially in the equity space. This is because innovative strategies have the ability to boost your portfolio in an unprecedented manner, offering you the firepower necessary to achieve your financial goals. Innovation is a term that is frequently heard in our daily lives, largely in the context of technology. So, what exactly is innovation and can you, as an investor, benefit from this phenomenon?
Innovation in Investing

Innovation does not need to be purely technological; rather, it can be as simple as the invention of the wheel or something complex like DNA re-arranging. An excellent instance of innovation is the evolution of the Indian railway, from the humble steam locomotives plying between stations pre 1960, to the indigenously built, semi-high speed “Vande Bharat” of today. Innovation can fall under various categories, from radical innovation, capable of replacing an existing product or system with a brand new one, to disruptive innovation, which creates new and affordable solutions and, incremental innovation, which involves upgrades to existing products and services. Throughout human history, innovation has been the key to the survival of the fastest and innovating companies have outperformed their non innovating counterparts. This is because the former fare better in terms of organic growth through innovation, thereby providing investors with better opportunities for wealth creation. ?

Innovation Theme – Myriad Opportunities

Given the plethora of start-ups turning into unicorns, and the huge strength depicted by global innovators Meta, Apple, Netflix, Google and Amazon, there is no questioning the fact that innovation can occur at any juncture. Today, sectors across the board, including power, pharmaceuticals and healthcare, FMCG, auto, agro chemicals, technology services, auto ancillaries, telecom and financial services, among others, are indicating robust innovation, offering investors an excellent opportunity to board the bandwagon at the right time.?

Going ahead, the scope for innovation becomes even larger when we consider India’s aim to be a ‘net zero’ carbon economy, as per its pledge under ‘The Paris Climate Agreement’. This is likely to happen in 2 parts, which include renewable energy generation and reducing existing emissions. Accordingly, the de-carbonization cycle, which will be at its fullest capability between 2030 and 2070, is an excellent opportunity for innovation investing.

Innovation is also a huge trend in the telecommunications sector, especially with the recent deployment of 5G, a disruption which is seen fuelling transformation across varied industries like logistics, mobility, healthcare, fintech, energy and regulatory-related sectors. Add to it the potential for innovation inherent in legacy sectors such as defense, railways, and auto ancillaries and innovation becomes a fool-proof theme for future-ready investors.

Innovation Fund – Yes or No?

As an investor, you may find yourself rooting for the innovation theme. But, do you know how to harness its full potential in the most optimal manner? If you are looking for a one-stop solution to help you avail the glory and returns of innovation, then a mutual fund scheme adhering to this theme could be your best bet. Such an offering tends to have a bottom-up investment approach and is both sector-agnostic and market cap-agnostic in nature. Such a scheme offers optimal diversification through a single route, allowing you to invest in innovative companies across sectors, themes, market capitalisations.?

In case of one of the offerings in this space from a top mutual fund, they also provide geographical diversification owing to which investors can garner the benefits offered by innovative companies across geographies. As a result, such a scheme is well placed to tap into the futuristic themes and opportunities yet to become visible in India, including cloud computing, datafication, driverless cars and artificial intelligence.?

To conclude, for investors who are keen on leveraging future-ready themes, innovation funds are an excellent bet in the current scenario, owing to the ongoing macro-economic aspects such as geo-political tensions, rising inflation and diversification of supply chains post the pandemic. As a sustainable and future-focused theme, innovation has the ability to boost your portfolio while protecting it from major external shocks. So, if you are planning on recalibrating your portfolio, the time to do so is right now.?

(Author: Shalab Gupta Bibhab,Founder,Bibhab Capital)