There are a multitude of options for NRIs to start investing. From term deposits to provident funds to direct stocks, the basket of investment options is plentiful.
When you go down, you have to consider their financial profile and their risk appetite. The level of risk you are prepared to take, the investment horizon and a variety of other important factors, including your tax requirements, should be taken into account.
If a hands-on approach is what you’re looking for, one in which you have full control over where and when to invest, there are other areas of your life that you need to consider. For example, time zone differences, your current bandwidth – would you be able to manage a portfolio and your business demands together?
All things considered, here are some of the popular and niche investment options that NRI may opt for:
Confidence in real estate investment
The operation of the REIT is similar to that of mutual funds. When mutual funds invest in stocks, debt or gold, a REIT invests in real estate projects, as the name suggests. For NRIs looking for exposure to the Indian real estate space coupled with abundant liquidity, REITs should be put on a pedestal.
Traditionally, getting exposure to this space required large investments, documentations, and overall the process of purchasing a physical space was a hassle. By investing in REITs instead, the investor is able to gain exposure to the physical real estate assets held by the promoter of the REIT. Rental income from the underlying real estate is paid to REIT holders as dividends or interest payments, while initial capital appreciation is in line with the expanding Indian real estate market.
In India, there are only three REITs compared to 225 in developed markets like the United States, and the concept of REIT is relatively new in India. Nonetheless, we recommend investing in REITs if you are looking to add diverse, hassle-free real estate assets to your portfolio.
Portfolio Management Service (PMS)
PMS allows the creation of a personalized portfolio based on the investor’s profile. There are a large number of PMS registered by SEBI that deal with different instruments – debt, stocks and other securities.
NRIs can start investing with a PMS through their NRE or NRO accounts if their goal is to build long-term wealth and are looking for a specially suited portfolio.
Another attractive option for NRIs is a mutual fund. Even though mutual funds offer rigid portfolios, the mutual fund path offers NRIs flexibility in terms of fund management. They try to meet the needs of investors by offering funds that invest in stocks, debt, or a hybrid of the two.
If you have an NRO or NRE account this is something you can definitely consider.
The Small Box is a whole new technology that facilitates informed investment decisions for retail investors, whether it is for NRIs or Indian residents. NRIs seek professional advice from asset managers, which usually requires a minimum investment of Rs 50 lakh if they were to benefit from a PMS service.
Small case fills this gap by connecting registered asset managers and investment advisers with retail clients for a small fee. Unlike mutual funds, the investor has full authority to press the buttons – the trading decisions. In other words, the professionals of this platform will only give advice and will not make the decisions for you.
Thanks to a small box, investors can choose from a wide range of investment themes. Some popular themes on the platform are debt, gold, and stocks; small cap multi-bagging machines; and ETF.
RBI GILT bonds
Without risk would be the definition in a nutshell of this type of investment. By purchasing GILT bonds, the investor is essentially lending money to the Indian government for a period of 3 to 5 years. If you are an NRI with a long term investment horizon; seek to generate a return close to the rate of inflation; and having a zero risk appetite, RBI GILT bonds are ideal for you.
Another option for NRIs is exchange traded funds. They are very liquid investments because they are traded like any other listed stock. The value of the ETF at all times will reflect the value of the components of the ETF.
There are over 100 ETFs that NRIs can invest in, and these range from equity ETFs to gold to debt. Additionally, there are ETFs that track global indices like NASDAQ, in which NRIs can invest.
The requirements for starting your investment journey using the following methods are more or less similar. However, for all investment methods, the NRI would initially require a DMAT account and a bank account. While the PMS requires a minimum investment of Rs 50 lakh, to begin with, small cases require as little as Rs 1,000 to begin with.
Overall, with India poised to become the fastest growing economy, the equity space is expected to soar. While the stock market is a leading indicator of our economy, and as our economy moves towards the $ 5,000 billion mark, so will the stock market. Therefore, it would be in favor of an NRI to adopt investments that are directly linked to stocks.
The author, Divam Sharma, is the co-founder of Green Portfolio. Opinions expressed are personal