Explained: Tips for Nris to Invest in Long-term

There is a surfeit of options for NRIs to start investing. From fixed deposits to provident funds to direct equities, the basket of investment options is plenty.


When circling down, one must consider their financial profile and their risk appetite. How much risk are you willing to take, the investment horizon and various other important factors including your tax requirements must be considered.


If a hands-on approach is what you are looking for, wherein you have full control over where and when to make investments there are other areas of your life you need to take into the equation. For instance, the time zone differences, your current bandwidth – would you be able to manage a portfolio and your job requirements together?


All things considered, here are some of the popular and niche investment options NRI’s can opt for:


Real Estate Investment Trust
The working of REIT is similar to mutual funds. When mutual funds invest in Equities, debt or gold, a REIT invests in real estate projects as the name suggests. For NRI’s looking for exposure to the Indian real estate space coupled with ample liquidity, REITs are to be put on a pedestal.


Conventionally, gaining exposure to this space required large investments, documentations, and all in all the process of buying a physical space was a hassle. By investing in REITs instead, the investor is able to gain exposure to physical real estate assets that are held by the sponsor of the REIT. The rent income from the underlying real estate properties is paid to REIT holders as dividends or interest payments, while the initial capital appreciates are in line with the Indian real estate market expansion.


In India, there are only three REITs compared to 225 in developed markets like the US, and the concept of REITs is relatively new in India. Nevertheless, we advocate investment in REITs if you are looking to add diversified and hassle-free real estate holdings to your portfolio.


Portfolio Management Service (PMS)
PMS enables the creation of a customized portfolio depending on the investor profile. There is a great deal of SEBI registered PMS’s dealing in different instruments – debt, equities, and other securities.


NRI’s can start investing with a PMS through their NRE or NRO accounts if their goal is long-term wealth creation and if they seek a specially tailored portfolio.


Mutual Funds
A mutual fund is another attractive option for NRI’s. Even though mutual funds offer rigid portfolios, the mutual fund route provides NRI’s with flexibility in terms of managing funds. They try to cater to investor requirements by offering funds that invest in Equity, Debt, or a hybrid of the two.


If you have an NRO or NRE account, this is something you can surely consider.


Small case
The small case is a brand-new technology that facilitates informed investment decisions for retail investors, may it be for NRI’s or Indian residents. NRI’s seek professional advice from asset managers and this usually requires a minimum investment of Rs 50 lakh if they were to avail a PMS service.


Small case bridges this gap by connecting asset managers and registered investment advisory with retail clients for a minimal fee. Opposed to mutual funds, the investor has full authority over pushing the buttons – trading decisions. Alternatively put, the professionals on this platform will only provide advice and do not make the decisions for you.


Through small case, investors have a wide array of investment themes to choose from. Some popular themes on the platform are debt, gold and equity; small-cap multi-baggers; and ETF’s.


RBI GILT Bonds
Risk-free would be the one-word definition for this type of investment. By buying into GILT Bonds the investor is essentially lending money to the government of India for a period of 3-5 years. If you are an NRI having a long-term investment horizon; looking to generate a return near the inflation rate; and having a zero-risk appetite, then the RBI GILT Bonds are ideal for you.


ETFs
Exchange-Traded Funds stand to be another option for NRI’s. These are very liquid investments since they are traded just like any other listed stock. The value of the ETF at any point in time will be the reflection of the value of the ETF’s constituents.


There are over 100 ETF’s that are available for NRI’s to invest in, and these range from Equity to Gold to Debt ETF’s. Moreover, there are ETFs that track world indices like the NASDAQ, that NRI’s can invest into.


The requirements to begin your investment journey using the following methods are more or less similar. Nevertheless, for all investment methods, the NRI would require a DMAT account and a bank account to begin with. While PMS requires a Rs 50 lakh minimum investment, to begin with, small case requires as little as Rs 1,000, to begin with.


All in all, with India pivoting towards becoming the fastest growing economy, the equity space is set to soar. Albeit, the stock market is a leading indicator of our economy, and as our economy sprints towards the $5 trillion mark, so will the stock market. Hence, it would be in an NRI’s favour to adopt investments that are directly linked to equities.


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