Here Are the 5 Best Investment Avenues for NRIs in 2022

An NRI is an Indian citizen who lives outside India for 182 days or more in a financial year for employment or business. With the numerous options to choose from, it could be perplexing for NRIs to choose the right investment avenues that would offer them higher returns. Therefore, we have explained the 5 best investment options for NRIs to invest in 2022 that can help you earn higher returns with a diversified portfolio.

Here are the 5 best investment avenues for NRIs in 2022:

1. Equity Mutual Funds:

An Equity Mutual Fund is a mutual fund that invests more than 60% of its total assets in equity shares of different companies of different sectors. The asset allocation of a mutual fund is done by the fund manager, who is an expert with long-term experience. An Equity Mutual Fund is a moderate to high risk but high-return generating investment avenue. However, if you do a long-term investment in carefully selected Equity Mutual Funds, you can achieve your long-term financial goals, depending upon the amount you invest. They operate under strict regulations of the Securities and Exchange Board of India (SEBI).

If you are an NRI, you need to have a Non-Resident External (NRE), Non-Resident Ordinary (NRO), or Foreign Currency Non-Resident (FCNR) account in India to be able to invest in mutual funds in India. Click here to read more about the types of bank accounts an NRI can open in India.

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2. NRI Fixed Deposits:

NRI Fixed Deposit is another popular financial instrument to invest money earned outside India. In order to start investing in fixed deposits, you need to have an NRE, NRO, or FCNR account with the bank or Non-Banking Financial Institution (NBFC). Similar to regular fixed deposits, the investors receive a fixed interest rate that differs from bank to bank. It may also differ depending on the amount and tenure of the deposit. You can invest income earned outside India in NRE Fixed Deposit and income earned in India in NRO Fixed Deposit. Generally, the interest rate offered on NRE Fixed Deposits is comparatively higher than regular fixed deposits.

It is important to note that premature withdrawal of NRI Fixed Deposits is allowed either on a written request from account holders or can also be done online, with a penalty that varies from one bank to another. Typically, banks levy pre-closure charges of 1% applicable on all term deposits. However, NRE investors should know that the banks do not pay any interest on NRE Deposits that are withdrawn within one year of investment.

3. National Pension Scheme (NPS):

The key objective of the National Pension Scheme is to ensure the financial stability of the elderly post-retirement by offering some percentage of the corpus as a lump sum and the rest in the form of a pension. The scheme is managed by Pension Fund Regulatory and Development Authority (PFRDA). The investor has control over how the funds are divided through the asset types. However, if the investor does not specify the asset allocation, the assets are distributed automatically between asset classes based on your age. You should know that the pension is paid in Indian Rupees. Any Indian citizen except individuals from the armed forces can invest in the scheme, including NRIs. However, NRIs need to fulfil the following criteria to be eligible to invest in NPS:

• Should be between the ages of 18 and 60

• Should hold either NRE or NRO account to contribute to the scheme

• Must have a valid PAN or AADHAR Card

• Should invest a minimum of Rs 500 for account opening

• Should contribute a minimum of Rs 6000 every year

4. Gold:

The yellow metal is one of the most preferred options for creating an investment portfolio that does not offer you regular cash inflow in the form of interest or dividends. In gold investment, the gain is typically in the form of capital gain that you make as the asset appreciates in value over a long period of time. Since the gold investment is considered as a passive approach to portfolio investment, as per the accepted standard allocation model, you should allocate only 5% of your investment into gold, which can further be moved to 10%, but not more than that.

NRIs from all over the world can invest in physical gold, Gold Exchange Traded Funds (ETFs), gold bonds, etc. and get long-term benefits while diversifying their portfolio.

5. Real Estate:

Real estate in India has been a favourite of property investors across the world. Although the past few years have been a little gloomy for the real estate sector, there are signs of revival. With several options in terms of location and return on investment, India is a promising market for investors. NRIs are showing interest in the property market due to the weakening of the rupee against the dollar, which also shows that the investors are optimistic about the future of real estate. Furthermore, in spite of the fact that property prices have been increasing, the home loan rates are at historically low levels.

However, the NRIs should be careful when buying properties that are under construction. It is advisable to evaluate the builder's track record and not fall for marketing gimmicks. Make sure the project is registered under Real Estate Regulatory Authority (RERA) to ensure timely delivery and adherence to the terms laid down. If the builder has not registered the project for the RERA or the registration is pending due to any reason, you should avoid investing in it. Moreover, before investing in Real Estate, it is advisable to reconsider your needs and assess your risk appetite.

To Conclude:

These are the 5 best investment avenues for NRIs in 2022 that can offer good returns while diversifying your portfolio. Apart from these five, you should consider many more options to diversify your portfolios, such as direct equity, debt mutual funds, bonds, non-convertible debentures (NCDs), government securities, certificate of deposits, and public provident funds. Before investing in any avenue, it is advisable to consider your risk appetite and whether you want to invest in long-term, medium-term, or short-term. Make sure you completely understand the product and the risk associated with it before making any decision. If you are not sure, take the help of a financial planner, who will guide you to diversify your portfolio.

Happy investing!

Warm Regards,
Ketki Jadhav
Content Writer