Can NRIs invest in Indian Mutual Funds & should they?

nri_1

NRIs are generally known to invest in Real estate in India.

Now, after Real estate Bill, demonetisation of high value currency notes, Govt’s fight on Black money, IT department’s raid on many realtors, going forward Real estate might not deliver returns like in the past.

Personally I believe that land is for agriculture and for living but not for investment purpose. We buy land, land, land and only land and pump up land prices like hell and now for a middle class person to buy land / flat, he/she has to pay EMIs throughout their life. Its not a good situation. Agricultural lands are being converted to residential plots and being sold as investment. It is increasing land prices beyond limit and since agricultural lands are reducing, prices of food articles are also increasing. Double impact, both bad. I don’t want to talk about black money component in real estate transactions, which everyone is aware of.

In this backdrop, I would like to present an interesting & attractive investment option – Mutual funds. Mutual Funds have given good returns consistently in the past 22 years and the returns are not taxable, which is another advantage.

Returns delivered by some Mutual Fund schemes:

Scheme name

Average return p.a in last 3 years

Average return p.a in last 5 years

Average return p.a in last 10 years

Average return p.a since launch of scheme

ICICI Prudential Value Discovery Fund

31%

24% 17%

23% (Aug-04)

Invesco India Mid N Small Cap fund

33%

24%

17.5% (Mar-08)

Birla Sun Life MNC Fund

33%

24% 18%

18% (Apr-94)

UTI Midcap Fund

40%

25% 16%

20% (Apr-04)

Birla Sun Life Equity Fund

30%

21% 14%

25% (Aug-98)

One can observe from above table that mutual fund schemes have delivered very good returns over long-term and also the returns are completely tax-free.

The investment procedure for NRIs is very simple and is almost similar to that of Resident Indians.

Following documents would be required:

  1. 1 Passport size photo
  2. PAN copy self-attested
  3. Passport copy self-attested
  4. Overseas address proof (any utility bill)
  5. NRE / NRO bank account cheques
  6. Tax identification no. or functional equivalent in the country of Tax residency

 What are Mutual Funds?

Mutual Funds are called Asset Management Companies. They collect money from retail investors and invest in a set of 40 to 50 Stocks (Shares of companies), which are selected through thorough research by Fund manager and research team based on various fundamental parameters such as Profit margin, profit growth, revenue growth, Return on Equity, Return on Capital Employed, Management’s credibility, future growth prospects, future prospects for the sector etc. and the list will go on. They continuously monitor the companies’ performance and will be on continuous search for new companies with good fundamentals and future prospects to invest. They invest with long-term horizon and are business focussed.

In mutual funds, investment can be done in 2 ways:

  • Lumpsum / One-time investment
  • SIP: SIP stands for Systematic Investment Plan. Through SIP, one can invest fixed amount of money every month in different mutual fund schemes.

Advantages of SIP:

  1. SIP inculcates discipline in investing. We get income every month, we spend every month; through SIP we can also invest every month
  2. With small investments in SIP mode, huge wealth can be created in long-term

I will be glad to assist NRIs who are interested in investing in mutual funds. Please share this article/mail with your friends/relatives/colleagues who are NRIs, if you think it would be useful to them.

Email: laxman.vinay77@gmail.com

Mobile: 91-9538539049

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