In fact, every class of investor is now looking at mutual funds, given the fact that some mutual funds have given return in excess of 60 per cent.
There is an increasing trend from Non Resident Indians (NRIs) to move money into mutual funds. While earlier they preferred real estate, selling a real estate and renting one also entails tax liability. Also, real estate is not very liquid and for a NRI to ensure its upkeep from abroad is a herculean effort.
How do NRIs invest in mutual funds?
a) Open a NRE or NRO account first
To begin with you must have either a NRE or a NRO account. In case you open a NRE account, the funds invested in the mutual fund would be transferred back to the NRE account and the amount would be freely repatriable. To know the difference between a NRE and a NRO click here
b) Approach a broker
You can than open a broking account with any broker. We suggest that you look at the charges that are levied, before you open a account. The charges might be slightly more expensive at the private sector banking subsidiaries, which is why you might want to avoid them.
c) Once the account is opened you can start buying units
A few things to remember
1) You should have knowledge
If you are investing large sums, it's best to have some knowledge of the mutual fund industry. For example, if you are a risk averse investor you should avoid equity mutual funds and park your money in debt dedicated mutual fund schemes. Though we must admit that some mutual fund schemes have given stupendous returns in the last one year.
2) Seek professional advise
It's best to seek professional advise before you invest. For example, in the case of equity mutual funds, it maybe necessary to analyze the portfolio of the mutual fund scheme that you are buying. For example, if pharma stocks are not likely to do well and the scheme is skewed towards pharma stocks, you should avoid the scheme. On the other hand if the economy is set to recover, than you must buy the scheme where the portfolio comprises stocks that are likely to benefit from the economic upswing.
3) SIP or Systematic Investment Plans
The SIP plans are good for NRIs. You can invest each month in small amounts and build a good portfolio.
While there is no restriction for NRIs to invest in Mutual funds in India, one should be careful and seek advise. Even if the track record of a mutual fund scheme is good, there is no guarantee that past track record is a good indication of future performance. It would also be good to invest through SIPs as you would not have to be worried about timing the markets.