With the Indian rupee witnessing its sharpest fall in 6 years earlier this month, non-resident Indians (NRIs) planning to send money home are in for a good windfall. For every Indian expat in the Gulf, the question that pops up every now and then is: “Am I saving and investing enough for the future?”
The need to save and invest to achieve goals and aspirations varies from person to person, but is there a quick fix solution to all investment needs? Unfortunately, no. Investing requires patience, commitment and time to reach the finishing line, but the good news is that it’s possible.
For NRIs looking to put their savings to work, here are six investment options that should form part of their portfolio.
1. Mutual funds
Investments into mutual funds are one of the best options available to NRIs. Mutual funds are large pools of investors’ money managed by professional fund managers. They operate under regulations of the Securities Exchange Board of India (SEBI), and include equity, debt, balanced, money markets, sector-specific and index funds. Depending on the fund type and choice, annualised returns on these on a three- to five-year scale will vary from, say, 8 per cent (debt) to as high as 15 per cent (equity).
An NRI needs an NRE, NRO, or FCNR account in India to be able to invest in an Indian mutual fund. These accounts help to facilitate the investment and payout process. A well-diversified investment into mutual funds will deliver superior inflation-beating returns and enable investors to plan for long-term goals.
A direct investment into stocks has the potential to deliver attractive returns. It is important to have a portfolio of growth stocks and to regularly review their performance. A well-planned investment in stocks can in the long term deliver 12-15 per cent annual returns in the current conditions, and it can be a good source of future wealth. Equity and mutual fund investments do carry risks, which can erode the portfolio considerably, however these can be mitigated if investments are monitored regularly with timely corrective actions. Standard Chartered’s Global Indian programme helps NRIs choose from a suite of wealth management solutions making it easier for them to invest in mutual funds, equities and bonds.
3. Fixed deposits
This is the most common form of investment by Indians in the Gulf. Interest rates on these accounts vary depending on the deposit size and/or bank. However, on a long-term basis these tend to deliver low or negative inflation-adjusted returns. While it is important to have bank deposits, the overall proportion has to be balanced out between other investment options. With yet another imminent repo rate cut by the Reserve Bank of India on the cards, banks are expected to lower deposit rates. So if you are a big-time depositor, you may want to reconsider your fixed deposits. Enjoy attractive rates on fixed deposits with NRI Banking with Standard Chartered Bank.
4. National pension scheme
If you are looking for a tax-efficient investment option, you can consider investing in NPS (National Pension Scheme). This is a cost-effective, easily accessible, and tax-efficient way to invest your money. NRIs can open an NPS account online if they have a PAN card and a bank account. Backed by the Indian government, the NPS is seen as a way to help build savings for retirement while enjoying tax benefits. The returns offered by NPS are much higher compared to traditional tax-saving investments such as the Public Provident Fund. On average, NPS tend to offer 8-10 per cent annualised returns.
5. Gold and alternative investments
Indians have been investing in gold for thousands of years and it has so far proved to be a solid investment option. Gold acts a hedge against inflation, offers high liquidity and can help you to balance the risk in your portfolio. Gold exchange-traded funds and mutual funds are good vehicles to invest in gold. Other alternative investments include commodities, derivative contracts, precious metals, private equity and hedge funds. These forms of investments are for the more discerning and professional investors who are able understand the risk-reward relationship.
6. Real estate
Anarock Property Consultants’ Consumer Sentiment survey earlier this year reaffirms that NRIs continue to view real estate as a favourable investment asset class. No less than 78 per cent of the NRI respondents in the survey indicated that they prefer real estate over other asset classes like stocks, fixed deposits, gold and mutual funds. Being an NRI, you can invest in a property in India and earn handsomely by letting it out. Most NRIs naturally gravitate towards properties in their cities of origin. That said, recent trends show NRI investors are now considering cities that will yield superior investment returns. Standard Chartered Bank’s Global Indian programme can help you in financing and refinancing the property of your choice across India from the comfort of your home.
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