I am an NRI. Please suggest to me some good investment options. Is it worth investing into diversified equity funds with a time horizon of 3 years plus?
-- Sathish Kumar Vodapally
Diversified equity funds have always been and will remain the best long-term bet. A three-year average return of 26.25 per cent provides testimony to this. No other asset class has ever generated such high returns. Hence, we would advise you to invest in 2-3 well-diversified equity funds. Our recommended picks include Franklin India Bluechip, HDFC Equity and Franklin India Prima. All the three have a long history of very strong performance.
However, you must realise that for equity investments, three years may not be an adequately long horizon. If you can start with a five-seven year plan, your risk will be much lower. Consider this - had you invested in Franklin India Bluechip in the worst possible day, your 3-year return would have been at least 11.81 per cent. As the investment horizon increases to five years, the worst possible return rises to 16.40 per cent. Though these figures are based on the historical performance, they definitely give us an idea about how equities perform over the long-term. Thus, if possible, do increase you investment horizon to over 5 years to obtain increased benefit from equity investing.
But before you proceed further with your investment plan let us remind you of the basic formalities needed by an NRI to invest in Indian mutual funds. NRIs cannot invest in Indian Mutual Funds in foreign currency. You need to give a Rupee cheque from your NRE, NRO, NRSR bank account in India. You may also send a Rupee cheque from abroad payable in a bank in India. However for an NRI to invest it is mandatory that he/she maintains a bank account in India.
That apart, you can repatriate your capital as well as capital appreciation amount post-payment of capital gains tax, if you continue to be a non-resident Indian. Most funds in India provide this repatriation benefit.
This article was originally published on July 23, 2004.
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