Q. My son is an NRI. He desires to invest about ₹50,000 per month through his overseas bank in foreign currency. His aim is to ensure capital security, growth. ie risk-free capital appreciation. Please advise on investment opportunities in India, more desirably in Systematic Investment Plans.
V.N. Vasudevan
A. There are multiple levels of complexity in what you have asked. First, investing in Indian investment products, directly from an overseas bank account, in foreign currency, is fraught with complications and may often not even be allowed in many financial products, barring banks and a few others like insurance products. If his plan is to eventually return to India and he is investing for such a purpose, it is best that he has an NRE account here locally, transfer funds into it and then use it to invest in India.
If he plans to stay abroad and does not wish to convert his savings into rupee, then there are two options: one is to invest in FCNR deposits in India and repatriate the same on maturity. This will offer fixed return and a high degree (not 100%) of safety; two, invest in overseas funds (there) that in turn invest in India. That means he will be investing in funds with origin in his country of residence in funds that invest offshore (In India). This is a better way to ensure he invests with his overseas bank account.
Second, if he is open to transferring funds in India and investing through an NRE account, then he can invest in either NRE deposits or choose to invest in debt mutual funds or equity mutual funds in India depending on his risk profile.
Third, depending on which country he is in, there might be restrictions on what he can invest in. For example, if he is in U.S./Canada, many mutual funds are not available for such non-residents but they can invest directly in stock markets. If he plans to invest in India, our suggestion is to get a fee-based financial adviser and explore the options as well as tax implications.
Q. My wife (59) and I (67) are both retired. Our terminal benefits and savings together to the tune of ₹1.50 crore are invested in the following manner: bank FDs — 38%; Sr. Citizens Saving Scheme — 20%; Mutual — 21%; equities — 14%; NBFC/company deposits — 7%
Existing mutual fund investments are accumulated through SIPs over a period of 7 years when we were in service; we stopped the SIPs 8 years ago.
Since bank FDs (₹57 lakh) fetch lower returns, we are thinking of reducing those and shifting ₹25 lakh from this to other investments viz. company deposits or mutual funds. Please advise as to how much we can shift from there and reinvest in MFs or deposits.
KM Pillai
A. Instead of moving from bank FDs to a higher risk option, if you are okay with having pay-outs, then consider gilts and State development loans. These are government bonds offered on the RBI Direct Retail platform as auctions. It is currently a good time to enter into such bonds with tenures of 5 years to 10 years as yields range from 7.3% to 7.6% presently. These bonds will pay out half yearly interest and are the best options today with sovereign guarantee, outside of Senior Citizens’ Scheme. Such yields may go down soon. You can invest by opening a free account on the platform https://rbiretaildirect.org.in/#/
These bonds can be sold before maturity but it is best that you hold them till maturity to avoid mis-timing the market. Also, liquidity in the secondary market may not be high for all the government bonds.
If you do not want interest payouts or want more tax efficient options then consider target maturity funds with a 4-5 year maturity date.
These can be sold whenever you wish to, but to avoid price volatility it is best that you hold them till maturity. Their yields are presently at 7.3-7.5% but can go down soon as interest rates are softening.
(The writer is co-founder, Primeinvestor.in)
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