NRI Investment Guide to Mutual Funds, Stocks, and Bank Deposit

by Kim Gill Writer

Many NRI don’t know where and how to invest their money to get the best returns. With so many NRIs investing in property, they don’t see what their other options are, not that investing in property is a bad deal, but it’s a fixed asset and cannot be used immediately in time of exigency. So, what are the other options?

There are three other options that are known to be popular among NRIs: mutual funds, stocks, and NRE/NRO bank deposit. 

Mutual Funds:

Before you start to invest in anything, one basis you must follow is to make the list of your income, expenditure, how much are you willing to invest, and what is your expectation?    

There’s no such definition for mutual funds, but in simple terms; it is professionally managed trust that merges together the sum of many investors and invests it further into securities like bonds, stocks, infrastructure, or short-term money market investments.

Rahul Srivastava, an investment professional suggests, "Mutual funds offer great benefits for NRIs in terms of return they offer, and they are diversified by nature and offering a degree of safety. In addition, there are several funds which have done exceptionally well constantly. Offering 13-14% percent return on the long-term investment. You can choose the duration of your investment. For best returns go for a 5 years or a 10 year plans.

Some of the top mutual fund investment service companies in India are:  Birla Sun Life, SBI Blue chip Fund, UTI Mutual Fund, Kotak Mahindra Asset Management Company, and Reliance Capital Asset Management etc.
 

Stocks

You can invest in the stock market by buying shares directly, or through an equity mutual fund. For investing directly, NRIs will require an NRE or NRO account as a Portfolio Investment Scheme (PIS) account.

Keep in mind that NRIs are only allowed to trade shares in India on a delivery basis. This means that you cannot participate in day trading or short-selling activities. And some important points to note are:

 

• Transactions done from the PIS account are reported to the RBI, as the central bank ensures that the level of NRI holding in any Indian company does not exceed 10% of its paid-up capital.
  
  
• For investing in Indian equities, NRIs will have to open a demat account and trading account, and get it linked with a PIS account with a local stock broker registered with SEBI.
  
  
• NRIs can also buy through IPOs of Indian companies, for which they do not have to go through the PIS account.
  

 

Bank Deposit

Bank deposits are the safest investment option with relatively lower interest than others. NRE and NRO deposits offer assured rate of returns between 8.5% and 9.5% for a long tenure. These are also reasonably liquid, so you can withdraw funds at any time which maybe hinders the return.

Other banking option is the FCNR deposits; the advantage of this account over NRE/NRO account is that you can deposit the money in your home country’s currency which eliminates the risk of depreciation in the local currency. Rates on FNCR deposits differ, for instance, the rate for a one year FCNR deposit in US dollar would be in the range of 3-4% while the same for a deposit in Australian dollar would be 6-7% and so on.

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Created on Dec 31st 1969 18:00. Viewed 0 times.

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