6 Reasons Why NRIs Should Invest in Indian Mutual Funds
In recent years, India’s economy has grown swiftly and consistently, positioning the country on a path of development. This expansion has created numerous investment opportunities, particularly in the mutual fund industry. NRIs (Non-Resident Indians) can take advantage of India’s burgeoning potential by investing in Indian mutual funds. The Indian economy is without a doubt one of the fastest-growing economies in the globe. It is anticipated that robust government reforms, a thriving startup ecosystem, and a young, skilled labour force will sustain its growth in the coming years.
Mutual funds are ideal investments for the majority of NRI for a number of reasons. The following are a few reasons:
1. Growth in India
Despite a challenging external environment, India will have the fastest-growing economy among the seven largest emerging markets and developing economies, according to the World Bank’s report on global economic prospects.
Prior to a decade ago, India’s GDP ranked eleventh in the globe. According to the International Monetary Fund, India’s economy is now the fifth greatest in the world, surpassing the British economy. A youthful, English-speaking population and a reformist government are factors that have contributed to India’s rapid economic growth.
2. Better Option for Investments
NRIs used to make significant investments in India’s real estate industry. The real estate market, however, has not been doing well lately. There are too many homes. Buyers are far more likely to pay less than what is stated for the properties. Real estate, formerly seen as a secure investment with strong returns, has had much slower growth, particularly after 2011.
Another favourite of Indians, gold, has historically had negative and slow growth. It is not an investment with a high rate of return. In that regard, mutual funds provide far better returns than the first two types of investing, not just the two mentioned above, but also more. You may start investing in mutual funds with as little as $500, which gives them an edge over most other types of investment instruments.
3. Minimal Time and Effort
Investing in equities, bonds, securities, and other channels requires a high level of expertise and diligence. Mutual funds are vast teams in charge of various investment facets. It is difficult and time-consuming for one individual to acquire all of these skills. In contrast, mutual fund research and identification are considerably more accessible. However, you must first discover a fund that meets your investment requirements and risk tolerance.
When you invest in a mutual fund, you are outsourcing your investment decisions. Mutual fund professionals do the heavy labour for you. However, as an investor, you must occasionally (but not frequently) monitor the fund’s performance to ensure it meets your requirements.
4. Simple and Convenient
Mutual funds are a popular investment product due to their simplicity and ease of access. They are also highly customizable, allowing investors to tailor their investments to their specific needs.
Opening a mutual fund account is a breeze, requiring minimal documentation and can be done either online or through a traditional broker. This means that anyone can invest in mutual funds, regardless of their level of experience or investment knowledge.
Once the account is open, investors can easily purchase units either online or over the phone. This convenience allows for investors to easily buy and sell their holdings whenever they want, providing them with the flexibility to manage their investments according to their personal needs.
Another advantage of mutual funds is their liquidity. Investors can easily sell their holdings whenever they need the money or switch to another investment product without any hassle. This ability to easily access and manage their investments makes mutual funds a desirable option for both new and seasoned investors alike.
5. Diversification
The benefit of mutual funds is that you do not need to worry about this. Mutual funds, by their very nature, diversify and spread out investments. For instance, an equity mutual fund’s portfolio typically consists of 45 to 90 distinct companies’ shares. Therefore, if you invest in a mutual fund, your portfolio is already diversified.
Too much investment in a single instrument is extremely hazardous. If a negative event occurs, you could incur losses. It is recommended that individuals diversify their investments to avoid such a scenario. Those who invest in equities, bonds, etc., must diversify their holdings. In addition, you must routinely monitor your investments and eliminate low-performing and high-risk assets. The benefit of mutual funds is that you do not need to worry about this. Mutual funds, by their very nature, diversify and spread out investments. For instance, an equity mutual fund’s portfolio typically consists of 45 to 90 distinct companies’ shares. Therefore, if you invest in a mutual fund, your portfolio is already diversified.
6. Double Taxation Avoidance Agreement (DTAA)
Various mutual funds are subject to additional taxes. DTAA guarantees that you are not taxed twice. This is more easily comprehended by way of illustration. In India, capital gains are taxed at a rate of 15%, compared to 30% in the United States. Since India and the United States have a DTAA, you must pay a 15% tax in India and the difference in tax in the United States. However, since you have already paid a 15% tax in India, you will only be required to pay a 15% tax in the United States (30-15=15).
Mutual funds are one of the most adaptable investment vehicles available to NRIs. Since it provides the opportunity to diversify your investments, is easily managed, and requires little time and effort, it inherently fulfils the criteria for an ideal investment.
