As per the Ministry of External Affairs, there are around 1,34,59,195 NRIs i.e. Non-Resident Indians working outside India for building their career or establishing their businesses. That’s a big number for most of the countries (except India where the total population is 1.3 billion). People have their reasons to go abroad for work or business but they have one common reason i.e. to earn more money. haha
Earning money is not enough in the long run and considering the uncertain market situation, one should know – how to invest it wisely to build wealth. Jobs in foreign countries are not seen as stable or secured therefore, people earning abroad should park their hard-earned money in the safest investment options possible to manage difficult times. Most of the people are confused when it comes to investing properly to gain more returns on investment. In this article, I will be listing 4 best options for investing money which not only offers guaranteed good returns as well as safeguard your hard-earned money.
Before I start remember, this listing is for NRIs only and some of the options may not be the best fit for people living in India (i.e. doesn’t fall under NRI status).
This is my number one investment option when it comes to investing as an NRI. Fixed Deposit or FD is not new to anyone and almost everyone knows about it. It is a very traditional way of investing but there is an added benefit for the NRIs as compared to non-NRIs. When you invest in Fixed Deposit in India, interest earned over that FD is taxable however, it is exempted for NRIs. Your heard it RIGHT – Interest Earned on Fixed Deposit is 100% Taxable for NRIs.
There is no doubt that a fixed deposit is the safest investment among other options. I was able to earn 7.8% interest-free returns on my FD investment which is quite good for the guaranteed return plans and independent of market risks. However, it is also true that now (in 2020), the interest rates have been gone down drastically (may recover in future years) but considering the current market condition, I still best on Fixed Deposit for NRIs.
Always choose the well established or nationalized banks for the Fixed Deposit investment and avoid small or unknown banks just to get little more interest. This will assure the safety of your investment and peace of mind in the long run.
If you are scared of long term investment then you can even go for short term plans as well. A fixed deposit may not surprise you with hefty returns but returns will be guaranteed and consistent.
This is my second most favorite investment option. People have different views when it comes to investing in Mutual Funds and Fixed Deposit. Some consider Fixed Deposit. After all, they want guaranteed returns and some prefer mutual funds because they bet on the market and expect higher returns on their investment. Both option is good and it all depends on your personal preference and capacity of taking risks.
Mutual funds are seen to defeat the FD in the long run but it is dependent on the market situation. If you invest in the bull market (uptrend market), you can expect handsome gains on your investment but on the other side, if you invest in the bearish market (downtrend) you will find your investment net worth going in negative. Financial Institutions invest your money in the market on various instruments (based on your selected mutual fund) on behalf of you.
Even though mutual funds may negative returns in falling markets, I still consider it a good investment option because it has proven good returns over the long run. They have well-qualified fund managers to manage the investments and if you choose the right mutual fund and invest on a regular basis with a longer horizon, you can beat all other investment returns. Read Also – Steps to invest in a mutual fund as an NRI
To safeguard your investment, always choose the best mutual fund after discussing it with your financial advisor and look for the past 5-10 years of performance on your own. SIP (Systematic Investment Plan) is the best option because this also allows you to buy quantities at all rates allowing you averaging whenever market corrects.
Real Estate is my third favorite investment choice. However, unlike Fixed Deposit and Mutual Funds, it is not for everyone and it requires a big amount of money to invest in. I am not counting buying flats to the residential units here because I consider residential units are more of a liability than the investment unless your earning from rent (excluding all the expenses and taxes) is more than the fixed deposit interest rate.
Personally, I prefer the commercial space because the probability of getting good rents on this is high as compared to other real estate options. You can buy land and construct shops to lease or simply lease the land itself. Your choice of construction should be based on the type of market or surrounding you’re buying the land in. Sometimes, it takes little time before it starts generating money but eventually, it does.
The advantage of real estate investment is that the net worth of your investment rises and you earn rent as a bonus. If you buying a commercial space in a developing city at a reasonable price, you can secure your retirement with regular and tension-free good income.
It is advisable to invest in commercial land very near to the market even if it is a little costlier because this guarantees quick start your return on investment. Buying a residential unit is also a good option if you are getting it at the right price and in a city near to IT companies (where bachelor crowd is more and tenets are easily available).
NRIs have tax benefits when it comes to reselling the bought real estate property (purchased should be made using the NRI bank account).
Direct To Equity/Stocks
Direct investment to Equity or Stock Market is scary for many people and I also don’t suggest if you don’t know about the share market. This one is my last option and I invest very little portion of my saving. Investing directly in the share market is not as easy as non-NRIs.
NRIs should open a PIS (Portfolio Investment Scheme Account) to directly invest in any share trading in the Indian Stock Exchange. Almost all nationalized banks offer PIS account (Also, understand the brokerage and other charges before opening your account with any bank). You may contact your sales representative of the NRE (Non-Resident Rupee) account to get the PIS account open for you. Remember, day trading is not allowed for the NRIs. This option is open for you if you are interested in investing directly in the stock market and have good knowledge of selecting quality stocks.
You can consider putting only 20% percent of your saving in the stock market on a regular basis after analyzing and selecting the quality stocks. Don’t try to find the Hidden Gems for the investment else you may lose your money in no time.
It is advisable to invest in Large Cap performing stocks at regular intervals (monthly if possible) for the promising return. It is risky to time the market and regular investment allows making buying at all levels.
Pro Tip – Don’t complete your buying in one shot and always diversity your portfolio by buying quality stocks in 3-5 sectors.
- Is NRE FD Better Than Debt Mutual Fund?
- Understanding NRE, NRO and FCNR Accounts
- Simplified Sukanya Samriddhi Yojana | Can NRIs Invest?
These are my best options for you based on my personal experience. I would also prefer to divide my saving in these and my order of weight-age goes like this – FD (40%), Mutual Fund (20%), Stocks (20%), Real Estate (10%). Your priority should be totally based on your risk appetite. I hope you found it useful and Good Luck on your future investment plans.