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Advait

Advait Arora  | Answer  |Ask -

Financial Planner - Answered on Jun 23, 2023

Advait Arora has over 20 years of experience in direct investing in stock markets in India and overseas.
He holds a masters in IT management from the University Of Wollongong, Australia, and an MBA in marketing from Charles Strut University, NewCastle, Australia.
Advait is a firm believer in the power of compounding to help his clients grow their wealth.... more
vijay Question by vijay on Jun 19, 2023Hindi
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I want to invest in US stock market from India, requesting you please tell me the way to do this?

Ans: Go for mutual funds which are US Centric
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 12, 2024

Asked by Anonymous - Jun 05, 2024Hindi
Money
I want to transfer 10cr from the US to Indian stock market. What’s the best way to go about it? I was an NRI but now settled in India. I have about 10cr worth of US stocks (mostly index funds). I want to move those funds to Indian stock market.
Ans: Transferring funds from the US to the Indian stock market can be a complex but rewarding process. You aim to move Rs. 10 crores from US stocks, mainly index funds, to the Indian market. Here is a detailed guide to help you make this transition smoothly and effectively.

Understanding the Process

Transferring funds internationally involves various steps, regulations, and procedures. First, understand the regulatory framework and tax implications. The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) regulate the transfer of funds and investment in the stock market.

Step-by-Step Guide

The process can be divided into several key steps. Here’s a comprehensive breakdown:

Close US Investments
To start, sell your US stocks. Since you primarily have index funds, it’s wise to assess their performance. Index funds might have low fees, but actively managed funds often outperform them in diverse markets.

Understand Tax Implications
When selling US stocks, you might face capital gains tax in the US. Consult with a tax advisor to understand your obligations. Ensure compliance to avoid any penalties.

Open a Non-Resident External (NRE) Account
Open an NRE account in India. This account allows you to transfer funds without the hassle of constant currency conversion. It also offers benefits like tax-free interest.

Transfer Funds to India
Use this NRE account to transfer your funds. Choose a reliable bank with good exchange rates. Monitor exchange rates closely to get the best value.


Open a Mutual Fund Account Through an MFD or CFP
To invest in the Indian stock market, first open a mutual fund account through a Mutual Fund Distributor (MFD). MFDs can provide you with the necessary support and guidance in choosing the right funds.

Find the Right Portfolio Management Service (PMS) Through a Certified Financial Planner
A Certified Financial Planner can help you identify the right Portfolio Management Service (PMS) that aligns with your investment goals. PMS offers personalized management of your investments, aiming for optimal returns.

Disadvantages of Index Funds

While index funds are popular, they have limitations. They mimic market performance and cannot outperform it. Active fund managers, however, use their expertise to beat market returns.

Benefits of Actively Managed Funds

Actively managed funds offer several advantages. Fund managers research and select stocks with growth potential. They adjust portfolios based on market conditions, aiming for higher returns.

Disadvantages of Direct Funds

Direct funds might seem appealing due to lower fees. However, they require thorough research and constant monitoring. A Certified Financial Planner can guide you better with regular funds, ensuring professional management.

Benefits of Regular Funds Through a Certified Financial Planner

Investing through a Certified Financial Planner ensures you get professional advice. They help in selecting the right funds, managing your portfolio, and achieving financial goals.

Diversifying Your Portfolio

Investing in a mix of large-cap, mid-cap, and small-cap funds helps in diversifying your portfolio. Each category offers different risk and return profiles, balancing your investment strategy.

Large-Cap Funds

Large-cap funds invest in well-established companies. They provide stability and steady returns. These funds are ideal for conservative investors looking for consistent growth.

Mid-Cap Funds

Mid-cap funds invest in medium-sized companies with high growth potential. They offer a balance between risk and return, suitable for investors with a moderate risk appetite.

Small-Cap Funds

Small-cap funds invest in smaller companies with significant growth prospects. They are riskier but can provide substantial returns. These funds are suitable for aggressive investors.

Sector-Specific Funds

Consider sector-specific funds like pharmaceuticals, technology, or finance. They allow you to capitalize on the growth of specific industries. Ensure a well-balanced portfolio to manage risk.

Regular Review and Rebalancing

Regularly review and rebalance your portfolio. Market conditions change, and rebalancing ensures your investments align with your goals. A Certified Financial Planner can assist in this process.

Importance of Financial Planning

Financial planning is crucial for successful investing. It helps in setting clear goals, understanding risk tolerance, and planning for long-term objectives. A Certified Financial Planner can provide a personalized financial plan.

Genuine Compliments and Empathy

Your decision to invest in the Indian stock market is commendable. It shows a proactive approach to managing your wealth. We understand that this process can be daunting. Rest assured, with the right guidance, you will navigate this transition smoothly.

Final Insights

Transferring Rs. 10 crores from the US to the Indian stock market is a significant step. By following these guidelines, you can ensure a seamless transition. Sell your US stocks, understand tax implications, transfer funds, and invest wisely. Prioritize actively managed funds for better returns. Regularly review your portfolio and seek professional guidance from a Certified Financial Planner.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 25, 2024

Asked by Anonymous - Jul 13, 2024Hindi
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How can a NRI based out of USA invest in Indian mutual funds?
Ans: Investing in Indian mutual funds as an NRI (Non-Resident Indian) based in the USA can be a strategic move. Here’s a step-by-step guide to help you navigate the process effectively:

Eligibility and Documentation
Eligibility Check:

Ensure you qualify as an NRI according to Indian regulations.

Required Documents:

Passport and visa copies
Overseas address proof
PAN card
NRE/NRO account details
FATCA (Foreign Account Tax Compliance Act) declaration form
Investment Account Setup
Open NRE/NRO Account:

You need an NRE (Non-Resident External) or NRO (Non-Resident Ordinary) bank account in India.
This account will be used for all transactions related to your mutual fund investments.
KYC (Know Your Customer) Compliance:

Complete the KYC process by submitting the required documents.
KYC can be done through various online platforms or through a Certified Financial Planner (CFP).
Choosing the Right Mutual Funds
Consult a Certified Financial Planner (CFP):

Seek guidance from a CFP to select the best mutual funds based on your risk profile, investment goals, and time horizon.
A CFP can help you understand the tax implications and repatriation rules.
Types of Mutual Funds:

Equity Funds: Suitable for long-term growth.
Debt Funds: For stable and safer returns.
Hybrid Funds: A mix of equity and debt.
Sector Funds: Focus on specific sectors like technology or healthcare.
Investment Process
Invest Through a Mutual Fund Distributor (MFD) or CFP:

An MFD or CFP can facilitate your investment process.
They provide expert advice, handle paperwork, and ensure compliance with all regulations.

Fund Transfer and Repatriation
Fund Transfer:

Transfer funds from your NRE/NRO account to the mutual fund account.
Ensure the transfer complies with the Foreign Exchange Management Act (FEMA) guidelines.
Repatriation of Funds:

Earnings from NRE account investments can be repatriated fully.
For NRO account investments, repatriation is subject to specific limits and conditions.
Tax Implications
Tax Residency:

Understand the tax implications based on your residency status.
NRIs are subject to TDS (Tax Deducted at Source) on mutual fund gains.
Double Taxation Avoidance Agreement (DTAA):

Check if your country of residence has a DTAA with India to avoid double taxation.
Consult with a tax advisor for detailed planning.
Regular Review and Monitoring
Portfolio Review:

Regularly review your mutual fund portfolio.
Make adjustments based on market conditions and your changing financial goals.
Stay Updated:

Keep track of regulatory changes and updates in investment guidelines for NRIs.
Final Insights
Investing in Indian mutual funds as an NRI based in the USA requires careful planning and adherence to regulations. By working with a Certified Financial Planner and leveraging the right tools and resources, you can effectively manage and grow your investments.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 14, 2024

Money
Hello, I am a NRI live in USA. Like to invest in India like buying stocks, Mutual Funds and ETF like. I want to know what is process. What I have to do . I don't have any income and property in India. Please let me know how to do that. I am not sure whom to follow. I found many different answer on line. Where to start please advise ? Thank you, Sunil Kumar
Ans: As a Certified Financial Planner, let me guide you through this step-by-step process to help you invest seamlessly. Let's address your query from a 360-degree perspective to provide clarity and direction.

Understanding Your Investment Goals
First, it's essential to define your financial goals. Do you wish to grow your wealth, generate passive income, or save for retirement?

Being an NRI living in the USA, it's vital to consider your risk appetite, investment horizon, and tax implications.

Since you do not have any income or property in India, investments can be an excellent way to build financial assets back home.

Your focus on stocks and mutual funds is a smart approach. But, it's essential to invest systematically.

Setting Up Your NRI Account
To start investing in India, you need to open specific NRI bank accounts. These are essential as NRIs cannot use regular resident accounts for investments.

You will require an NRE (Non-Resident External) account and/or an NRO (Non-Resident Ordinary) account:

NRE Account: Best for investing as it allows full repatriation of funds, including principal and interest.

NRO Account: Ideal if you have any existing income in India, like rental income. However, repatriation is limited.

For mutual fund investments, it’s advisable to consult a Mutual Fund Distributor (MFD) or a Certified Financial Planner (CFP). They will help you open the necessary accounts and complete your KYC (Know Your Customer) formalities.

Why Consult an MFD or CFP for Mutual Fund Investments?
Many NRIs are drawn to direct mutual funds, assuming they are cheaper. However, this can be risky if you are unfamiliar with the Indian market. Mistakes can be costly in the long run.

By investing through an MFD with CFP credentials, you gain access to expert advice. This helps in better fund selection, diversification, and timely portfolio reviews.

An MFD or CFP can provide you with tax-efficient strategies and manage withdrawals, reducing your tax burden. This is especially critical given the complex tax rules for NRIs.

Step-by-Step Investment Strategy for NRIs
Start with Mutual Funds: Initially, focus on building a diversified mutual fund portfolio. Mutual funds provide professional management, risk diversification, and better returns than many other investments.

Accumulate Wealth First: Once you accumulate a significant corpus, say around Rs 2-3 crore through mutual funds, you can consider other investment avenues.

Portfolio Management Services (PMS): After achieving a considerable mutual fund corpus, you can explore Portfolio Management Services. PMS offers a personalized approach to investing, targeting high net-worth individuals looking for tailored investment solutions.

Alternative Investment Funds (AIF): After building a solid PMS portfolio, consider venturing into Alternative Investment Funds. AIFs involve investing in high-growth potential ventures, but they also carry higher risks.

Direct Stocks: Only after gaining substantial experience and building a robust investment base should you consider investing in direct stocks. Stocks can be volatile, and a CFP will guide you in selecting fundamentally strong companies.

Stocks vs. Mutual Funds vs. ETFs: What Should NRIs Choose?
Direct Stocks: Stocks are highly rewarding but require time, research, and risk-taking ability. As an NRI, managing a stock portfolio remotely can be challenging.

Actively Managed Mutual Funds: These are ideal if you want professional management without the hassle of selecting individual stocks. Actively managed funds can outperform ETFs, especially in fluctuating markets, by leveraging fund managers’ expertise.

ETFs: Many investors lean toward ETFs, but they have limitations. ETFs passively track an index, missing out on the active strategies that can generate higher returns. Additionally, tracking errors can impact returns.

Taxation Rules for NRIs
Taxation for NRIs is different, and you must be aware of the implications on your investments:

Equity Mutual Funds: Short-Term Capital Gains (STCG) are taxed at 20%, while Long-Term Capital Gains (LTCG) above Rs 1.25 lakh are taxed at 12.5%.

Debt Mutual Funds: Gains (both short-term and long-term) are taxed based on your income tax slab.

Additionally, Tax Deducted at Source (TDS) is applied on mutual fund redemptions for NRIs. However, you can claim a refund if your actual tax liability is lower.

Benefits of Partnering with a CFP for Long-Term Wealth Creation
Investing without a clear strategy can lead to suboptimal results. Consulting a CFP helps you align your investments with your financial goals, risk tolerance, and time horizon.

A CFP offers continuous monitoring and rebalancing of your portfolio. This ensures your investments remain on track despite market fluctuations.

As your portfolio grows, a CFP can help you transition into advanced investment options like PMS and AIF, ensuring you achieve optimal growth while managing risks effectively.

Some Final Insights
Begin your investment journey with mutual funds through a Certified Financial Planner. Once you accumulate a few crores in mutual funds, explore PMS and AIFs.

Only consider direct stocks after building a substantial portfolio and gaining experience. Stocks require a higher risk appetite and more hands-on involvement.

Avoid investment-cum-insurance products like ULIPs. Focus on pure investment options that offer better returns.

Regularly review your portfolio to adjust for market changes and tax regulations. This ensures you stay on the right track toward your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Latest Questions
Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Nov 22, 2024

Money
My age 62, male, getting rental income Rs. 90k nett. Already subscribing 12.5k in PPF for the past 2 1/2 years. No other investments. My target is 5 crores in 10 years. I already have Mediclaim Rs.50 lakhs for me & wife . Please advice me what to do.
Ans: Your current financial foundation is strong and shows promise:

A rental income of Rs. 90,000 per month provides consistent and predictable cash flow. This stability can serve as the backbone for your investment strategy.

PPF contributions of Rs. 12,500 per month for 2.5 years reflect disciplined saving. However, its returns may be insufficient to achieve a high-growth target like Rs. 5 crores in 10 years.

A robust Mediclaim policy of Rs. 50 lakhs for you and your wife ensures adequate health coverage. This safeguard allows you to focus on wealth-building without worrying about medical emergencies.

Despite these positive factors, achieving Rs. 5 crores in 10 years requires a carefully crafted and growth-oriented strategy.

Defining and Prioritising Your Financial Goals
Achieving Rs. 5 crores is ambitious yet achievable with a focused approach:

Define this target as your primary financial goal over the next decade.

Break it into manageable milestones: for example, Rs. 50 lakhs every 1-2 years in cumulative investments and growth.

Prioritise high-return investments that align with your risk tolerance and financial capacity.

Optimising Existing PPF Contributions
While PPF is a secure investment, its growth potential is limited:

Returns: PPF currently offers an interest rate of approximately 7-7.5%, which barely outpaces inflation.

Contribution Review: Consider capping your PPF contributions at Rs. 1.5 lakh annually (to utilise the Section 80C benefit). This ensures that excess funds are redirected to higher-return investments.

PPF can serve as a low-risk component of your portfolio but should not dominate your investment strategy.

Building a Diversified Investment Portfolio
A diversified portfolio will provide a balance of risk and reward. Include the following components:

1. Equity Mutual Funds for Growth
Equity mutual funds are essential for achieving high returns over the long term:

Large-Cap Funds: These invest in established companies and offer stability with moderate growth. They are ideal for a portion of your portfolio to reduce risk.

Multi-Cap or Flexi-Cap Funds: These provide exposure to companies of all sizes, offering growth and diversification.

Sectoral and Thematic Funds: Avoid these unless you have a high risk tolerance and understand market dynamics.

ELSS Funds: These not only provide tax savings under Section 80C but also deliver market-linked returns.

Why Avoid Index Funds?

Index funds may offer simplicity and lower expense ratios, but they lack flexibility. They cannot adapt to market conditions or capitalise on outperforming sectors. Actively managed funds, on the other hand, have the potential to outperform the market, especially in a developing economy like India.

Start with a Systematic Investment Plan (SIP) in selected funds to build wealth steadily.

2. Debt Mutual Funds for Stability
Debt funds add stability to your portfolio and reduce overall risk:

Choose funds with low credit risk and moderate duration to ensure safety and predictable returns.

Debt funds are suitable for short- to medium-term goals or as a fallback during market corrections.

Taxation Note: Both LTCG and STCG on debt funds are taxed as per your income tax slab. This should be factored into your planning.

3. Balanced Advantage Funds
Balanced advantage funds (BAFs) dynamically allocate assets between equity and debt. They:

Provide exposure to equity while minimising downside risk.

Offer a suitable option for someone nearing retirement but seeking growth.

4. Gold Investments for Diversification
Allocate a small portion (5-10%) of your portfolio to gold:

Gold serves as a hedge against inflation and currency depreciation.

Choose gold ETFs or sovereign gold bonds for ease of liquidity and better returns.

Emergency Fund Creation
Having an emergency fund is non-negotiable:

Maintain at least 6-12 months of expenses in liquid investments like liquid mutual funds or high-interest savings accounts.

This ensures liquidity for unforeseen events without disturbing your long-term investments.

Focus on Retirement Planning
At 62, balancing growth and safety becomes critical:

Estimate your monthly retirement expenses, considering inflation over the next 10-15 years.

Your target of Rs. 5 crores should primarily serve as your retirement corpus.

Allocate assets thoughtfully:

60-70% in equity funds for growth.
30-40% in debt funds for stability.
Periodically rebalance your portfolio to maintain this allocation.

Strategic Tax Planning
Tax efficiency can significantly impact your returns:

Continue using Section 80C to its full potential, including ELSS funds and PPF.

Consider the National Pension System (NPS) for an additional Rs. 50,000 deduction under Section 80CCD(1B).

Be mindful of the new taxation rules for mutual funds:

Equity Mutual Funds: LTCG above Rs. 1.25 lakh is taxed at 12.5%; STCG at 20%.
Debt Funds: LTCG and STCG are taxed as per your income slab.
Consult a Certified Financial Planner to optimise your tax strategy.

Regular Portfolio Monitoring and Rebalancing
Investing is not a one-time activity:

Review your portfolio every six months or annually to track performance.

Rebalance your asset allocation periodically to align with your financial goals and risk appetite.

Stay committed to SIPs even during market downturns, as this ensures cost-averaging.

Additional Suggestions
Avoid Over-Reliance on PPF
While PPF is safe, it is not sufficient for wealth creation. Shift excess contributions to equity-based investments for better returns.

Avoid Direct Stocks
Direct equity investing requires time, expertise, and constant monitoring. It carries higher risk and may lead to losses without proper research. Instead, rely on equity mutual funds managed by professionals.

Avoid Mixing Insurance and Investments
Do not invest in ULIPs or endowment plans, as they offer suboptimal returns. Stick to pure insurance products for protection and mutual funds for growth.

The Role of a Certified Financial Planner
To achieve Rs. 5 crores, a well-crafted financial plan is essential. A Certified Financial Planner (CFP) can:

Analyse your current investments and recommend improvements.

Design a customised strategy tailored to your income, expenses, and goals.

Provide periodic reviews to ensure you stay on track.

Finally
Achieving Rs. 5 crores in 10 years is a realistic goal if you adopt a disciplined and diversified approach.

Optimise your PPF contributions and channel excess funds into higher-growth investments.

Build a diversified portfolio with equity and debt mutual funds.

Include a small allocation to gold and maintain an emergency fund.

Stay consistent with your SIPs and review your investments regularly.

Work with a Certified Financial Planner to create a personalised roadmap.

By following these steps, you can secure your financial future and meet your goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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