Aiming for High Returns does not make you greedy if you understand your Risk-Taking Limit, Your Horizon to Invest & Asset Cycles. Under the high-risk category, NRI has a lot of options to invest in. As a thumb rule, one can take the horizon as a deciding factor. Long term goals like retirement, kids education have many years to accumulate. One can take some risk here. Here are the Investment Options for NRI in high risk category profile.
Updated till March 2020.
We have also written the following:
Investment Options for NRI – Low-Risk Category (Click To Read)
Investment Options for NRI – Moderate/Conservative-Risk Category (Click To Read)
Investment Options for NRI – High Risk Category
Equity MFs for NRIs & Debt Mutual Funds for NRIs
Mutual funds are one of the best investments available options for NRI’s. Broadly there are two types of mutual funds in India – Equity Mutual Funds & Debt Mutual Funds.
Both types of funds have different types of schemes as per the investment horizon & risk apatite capacity of an individual.
To invest in Mutual funds, an NRI needs to have any of the 2 bank accounts i.e. NRE or NRO.
The investment has to be made in Indian currency and not in foreign currency. Further, the investment amount can be directly debited from NRE or NRO accounts.
At redemption, the amount shall be paid in Indian currency either through cheque or directly credited to the investor account.
It’s to be remembered that some countries don’t allow NRIs (Especially US & Canada) to invest in mutual funds in India so an NRI must consult with their financial planner before investing.
Investment by NRI’s is taxable & it also attracts TDS (Tax Deducted at Source). Here is the link for Mutual Fund Taxation for NRIs.
Investment in Shares for NRIs (PIS)
NRI’s have many limitations when it comes to investment in Indian Stock Market. RBI has an extensive list of do and don’ts after becoming NRI for investment in Indian market. As per the RBI guideline an any NRI can’t hold the more than 5% of paid-up capital of any Indian company.
It’s to be noted that an NRI can invest, trade-in stocks or shares via secondary market only through a special account called as PIS or PINS Account (Portfolio Investment Services). NRI’s are not allowed to speculate in Indian Stock Market. They cannot trade in the intraday market. NRI’s only can take delivery of share purchases & give delivery of share sold.
So, being an NRI if you want to the trade-in equity market, you need to have:
- Bank Account – NRE or NRO
- Trading Account – with a SEBI authorized broker
- Demat Account– To hold shares.
An approval under the PIS is required for trading in the stock market. Only one PIS Account per individual is allowed. Also, NRIs cannot trade in all the Indian stocks. RBI publishes the list of stocks that are eligible for NRIs.
PMS (Portfolio Management Service) for NRIs
Another way to invest in Equity is PMS or Portfolio Management Services offered by many brokerage houses (Motilal Oswal, Prubhudhar Liladas, etc), or MFs (ICICI MF, TATA MF etc) or many individual investors (Basant Kothari, Porinju Velliath). Many ex-fund managers have also started there own PMS like Saurabh Mukherjea, Keneth Andrade, Samir Arora, Bharat Shah etc.
PMS is a high ticket (Minimum INR 50 L), concentrated portfolios. cost is high too. But one gets benefits of discretion (choice) as well as personal attention.
Real Estate Investment Option for NRI
NRIs invest in property due to emotional reasons & investment reasons. Also one of the reasons to invest in property by NRIs is to earn rental income.
There is no restriction on the number of real estate purchases, but the transfer of funds back to a foreign country after selling off the property is not easy. NRI need to be aware of the restriction on remittances. Details Here.
If NRI is selling or renting his property to a Resident, he will have TDS on the sell transaction or rent.
We also have a downloadable ebook on How NRIs can Invest in Properties.
NRIs can invest in Residential & Commercial properties. But they cannot invest or buy farmhouses, agricultural lands. Other types like a factory or industrial lands can be transacted by NRIs.
The property suffers from illiquidity. This means in good times it may be difficult to sell a property due to the unorganized nature of the asset. This makes it risky as an Investment Options for NRI.
NPS
The government of India do not wish to share the benefits of Small Savings (PPF or NSC) with NRIs. This is a known fact. But NRI who wishes to settle in India post-retirement, NPS (national pension scheme) is a good avenue to build a retirement kitty.
Fortunately, NRI (& OCI) can open an NPS account and can select the proportion of equity and debt investments in the portfolio and the schemes in which he/she wants to invest.
NRIs can invest in both Tier 1 (which has withdrawal restrictions) and Tier 2 (which is free form restrictions on withdrawals) accounts. Investment in NPS is liable for tax deduction also. Details Here.
These long term avenues with high risk can be used by NRIs to generate more returns & plan for long term goals.
If you have a question on any of these or Investment Options for NRI, do let me know through my email madhupam at thewealthwisher dot com or the comments section below.
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