I am a non-resident Indian (NRI) and 32 years old. I will shift to India next year after marriage and become a resident Indian. Can I start investing in mutual funds (MFs) in India?
One can invest in Indian MFs while being an NRI. You will need to use non-resident banking accounts—non-resident external (NRE) and non-resident ordinary (NRO)—to fund your investments. If repatriation of money to the foreign country/currency is not an issue, I would suggest that you use an NRO account since it is easier to work with for MF investments.
Once you return to India, you would need to file for a know-your-customer update and change your residency status. At that time, you can start investing from your resident savings account in India. However, note that while you invest as an NRI, there are a few schemes and fund houses that may be out of your reach since they are not allowed to be sold to NRIs. This is especially true for US-based NRIs, who are not allowed to invest in schemes from fund houses, including Franklin Templeton, Fidelity and Quantum. Once you become a resident, such restrictions will not apply.
I am 26 years old and earn Rs 58,000 per month. I can invest around Rs 25,000 per month and have a long-term horizon. Should I invest a lump sum in equities or start a systematic investment plan (SIP) instead?
There are several brokers who will enable you to start an SIP in equities as well and one can also do lump sum investments in MFs. Since you want to invest in terms of monthly savings, you are planning to start an SIP—be it in equities or MFs—and the question is which instrument is better for a young person starting to invest. The answer lies in your areas of expertise and the amount of time you can spend. If you are a non-financial professional and have little exposure or experience in the share market and don’t have the time to monitor investments closely on a regular basis, it would be best to stick to MFs. They offer the benefits of professional management and diversification at a relatively low cost.
I want to invest a lump sum of Rs 1.5 lakh. Will you suggest investment in blue-chip stocks or should I invest in fixed maturity plans (FMPs)?
The type of investment you choose would depend on the tenor. If you need your money at the end of a fixed tenor and if that tenor is about two-three years, you can go with an FMP investment since it may give a reliably good post-tax return for this time frame. If your tenor is longer than three years, you should go with a good large-cap fund such as ICICI Prudential Focused Bluechip or Franklin India Bluechip to seek potentially higher returns.
Srikanth Meenakshi is founder & director, FundsIndia.com
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