I am moving to the US for a few years for a project. I invest around Rs25,000 in mutual funds via systematic investment plans (SIPs) every month. Can I continue with my investments from there? Also, can I invest more via lump sum or increase my SIP amount?
Investors who move abroad and become non-resident Indians (NRIs) can, in general, continue with their mutual fund investments in India as most of the mutual funds accept investments from NRIs. The only exception to this, unfortunately for you, is for those who move to the US or Canada.
The reason is that many mutual fund companies are subject to the regulatory constraints placed on them by the Securities and Exchange Commission (SEC) of the US, and are also bound by other stipulations, such as the Foreign Account Tax Compliance Act (FATCA) regulations.
Consequently, only a handful of fund houses offer their funds to US- or Canada-based investors and even when they do, it is with some conditions.
At present, there are eight fund houses that accept investments from such NRIs: Birla Sun Life Asset Management Co. Ltd, UTI Asset Management Co. Ltd, SBI Asset Management Co. Ltd, L&T Asset Management Co. Ltd, DHFL Pramerica Asset Managers Pvt. Ltd, ICICI Prudential Asset Management Co. Ltd, Sundaram Asset Management Co. Ltd, and PPFAS Asset Management Pvt. Ltd.
Each of these fund houses may have a different condition or an additional requirement that may be imposed on investments from US- or Canada-based NRIs. For example, some fund houses accept investments only when they are made using paper application forms (no online access). Almost all the fund houses require an additional document, such as a declaration, signed by the investor. At least one of the fund houses mentioned above takes investment from such investors only when the investor is physically present in India and not while she is abroad.
So, given these rather onerous conditions, you would need to evaluate your portfolio and options. You would have to stop investing in funds outside of these fund houses, at least for now. For the ones that are from some of these, you would need to enquire to find out what extra requirement you would need to fulfil to continue your investments.
It would indeed be a good idea to continue your investments in India, given the growth potential that the market here exhibits. This would be especially true if you have plans to come back to India.
I had read in your newspaper that now it’s mandatory for fund managers to disclose their commission income on the scheme I am investing in, on my consolidated account statement (CAS). Should I keep a tab on this? How can this help me as an investor?
Over time, the Securities and Exchange Board of India (Sebi)—the regulator of mutual funds in India—has mandated several disclosures from entities that make these investment instruments available to the public.
These apply to both the manufacturers (the fund houses) as well as the advisers or distributors. Broadly speaking, the fund houses are required to disclose the fund management fee charged to the investor in every scheme-related publication they put out. They are also required, since recently, to disclose the salaries paid to their fund managers.
The commissions that you refer to, however, are to be disclosed by the advisers and distributors that make funds available to investors and guide them about it. For some time now, they have been required to disclose the percentage of commissions they earn from the schemes they sell. Recently, Sebi has directed that the consolidated account statement, issued by the depositories on a semi-annual basis, also carry the amount of commission paid, in a central place. So, these are disclosures from your investment adviser. It is something that you should look for if your investment adviser has not already informed you about it. As an investor, it is your right to get fair and balanced guidance from your adviser, and an awareness of the commission earned by her would help you determine if you are getting unbiased advice.
I am a late bloomer with regards to mutual funds. I am 42 and started investing in this medium last year. I have invested around Rs2 lakh through lump sum in total and my portfolio mostly consists of equity-linked savings schemes (ELSS) and a few debt funds. Can you please suggest a better way of investing? Also, if I convert to monthly SIPs, what should the portfolio be like?
While it is good to start as early as possible, the age of 42 is definitely not too late a start. It is not atypical for a person starting off to invest, as you have, for getting tax deductions and investing cautiously in debt funds otherwise. Going from here, the key thing to realise is that you have a long way to go before you retire (say, another 15 years), and you can afford to invest for the long term without being too concerned about market risks. You are right in observing that SIPs would be a better way to invest in this manner. Apart from ELSS funds, you should start investing in a bouquet of diversified equity funds. For example, if you can start a Rs10,000 SIP, you could invest in a large-cap fund, a couple of diversified funds, and a balanced fund in equal proportions. This would help you build a healthy corpus over time and do so in a systematic manner.
Srikanth Meenakshi is co-founder and COO, FundsIndia.com.
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