Expatriates working up their investments in India are often too occupied or not informed enough to get the better of Indian investment ecosystem. I’ve written this post to give them some pointers that might come handy. First, you must keep in mind the inflation rates in India v/s the country you’re working/were working in. Indian inflation, which has never dropped below 5%, went as high as in double digits in the past 10 years, but is now apparently tending back to around 5%.
Secondly, the duration of your investment stint is important. If you’re in it for a short term, invest in something with a smaller lock-in (FD and Term deposit, NSC, SIP, ELSS, etc.). If you’re here for longer term, hold on to your investments with smaller lock-in period and plan long-term real estate or gold investments.
Third is the tax on income. Compared to developed economies, India is lucrative owing to its lower income tax and higher minimum-return on investments. For instance, the yield on just parking your money savings account is 6% (4.2% after tax if you are earning above 10L per annum), which is at least twice the usual inflation rate in most developed economies. While there are several investment instruments available to an expat, I personally recommend Systematic Investment Plan or SIP.
What’s the big deal about SIP?
SIP is the big deal. It helps natives and expatriates build a volatility-agnostic corpus over years by just investing a few thousands each month. Since you’re buying every month, you beat the market volatility.
The secret sauce
It’s the power of compounding. The sooner you start your SIP, the bigger your corpus. The trick is not to invest big amounts, but to start investing as early as possible. If you’re looking for inspiration, Warren Buffett filed his first Income Tax Return at the age of 14.
The perfect dream-catcher
A good investment with best SIP plan goes a long way in not just warding off your financial nightmares (falling health, loss of life, legal issues, migration) but empowering you to achieve your goals (wedding, house, world-travel, new business, comfortable retirement).
How to start? Take the first step.
Today, there are a lot of flexible yet powerful SIP Plans out there. One trusted name is Birla Sun Life’s SIP (a part of Aditya Birla group). Termed Sabse Important Plan by Birla Sun Life, their offerings are rather apt for those who wish to invest without any complication. Depending on your financial goals (home or retirement or tax saving) they have different products that you can further customize. They have a handy SIP calculator that tells you what returns to expect for a set investment over a specified time period. On that note, if you invest Rs. 10,000 a month for the next 20 years, in 2037, you will have a corpus of Rs. 1 crore (at 12% interest per annum).
To investing, then!