6 things NRIs should know before investing in India

If you are a Non-Resident Indian (NRI) wanting to invest in India, you have a wide range of options today. However, while exploring the market, you may be overwhelmed by the profusion of choices and not know which way to go. Irrespective of where you stay or what you do, finding the right NRI investment in India can clinch your future financial security. India is a growing market, and tapping into its expanding opportunities can help you be a part of this growth. While the investment process may seem cumbersome, here are six tips that can simplify the process.

Understand the difference between a product and a process
 

When investing your money, one of the first things to note is the difference between a product purchase and a process. You are purchasing a product if you invest in real estate (say, a house). Real estate is one of the most potent financial assets out there and can help you earn significant returns over time. However, this is a one-time step. There are no continued formalities. Once the house has been bought, it is in your possession and remains so until you sell it. 

Real estate purchase is drastically different from stock trading or mutual fund investments, where you may invest your money every now and then. For this purpose, you may need an account with a broker or a mutual fund company. If you are investing through a systematic investment plan (SIP), you could invest a chosen amount every month for many years.NRI customers can only make an investment in equities. In this case, you are not just purchasing an asset but initiating a process.

Follow the trail of your investments regularly
 

Investing money is not enough. You must also know exactly where your money ends up. NRIs are a prime investor category. By the simple virtue of earning in a foreign currency, you may receive a lot of broker advice on investing in seemingly fancy investment options in India. Some brokers or plan administrators may also approach you with slightly off-beat investment opportunities. However, before you invest your hard-earned money in any of these products, make sure to run a background check and trace the money in the scheme. 

It will be of immense benefit to inquire about the investment’s scope of growth, understand where your money will be invested, go through the plan’s portfolio, and consult a professional financial advisor. Sales pitches can be tempting, but an error of judgement can cost you dearly. So, invest your money only if you are absolutely sure of the investment and have faith in the product. You can consider going through the website of the Reserve Bank of India (RBI) to be up to date on monetary policies, regulations, market trends, etc. This way, you can be more informed and will be able to see through sales pitches.

Know your intermediary and their role
 

The intermediary is another crucial component in an investment. When you go through the various investment options in India, it is essential to know the intermediaries well. For instance, if you are investing in stocks, you would be buying them through a broker. In this case, the broker becomes the intermediary. Each broker may charge a brokerage- inclusive of service fee, commission, etc. The costs can differ from broker to broker. So, comparing different platforms and their prices can be helpful while picking the most cost-effective deal. 

Comprehending the role of an intermediary also helps you understand how your money will be managed. For instance, you can look at customer reviews for brokers to get a better idea of how responsive they are to investor issues and doubts. The broker will be the one who ultimately manages your money, so picking someone trustworthy can be a significant advantage. 

Ask as many questions as you want
 

Your investment can help you generate additional Indian income that can support you and your loved ones. This can be a substantial part of your portfolio and account for a significant chunk of your overall savings. So, try asking as many questions as possible about the product. Do not hold yourself back if you have doubts or concerns about the broker, investment, past performance, future returns, etc. You can inquire about the taxation rules for each financial year, the risk level involved, the redemption rules, penalties for early withdrawals, etc.

Verify the credentials of the broker
 

Many brokers may approach you. Some of them could be frauds or scammers. So, verifying their authenticity is critical. You can check their websites to get a better idea of their track record and that of their company. Suggestions or recommendations from family and friends can also be helpful. It may not be advised to deal with an unverified broker, as the stakes are too high, and it can be difficult to follow up with legal action when you are living a busy life in another country.

Check your money’s final destination
 

When investing in stocks, check the company and their core principles to have a clear picture of where your money is being invested. For instance, apart from financial growth, you may want to know if your money is invested in a company that believes in ethical work practices, fair wages, sustainability, etc. This can help you make more informed investment decisions. So, try to find out the final destination of your money.

Conclusion
 

There is no best or worst investment as long as your choice aligns with your needs and goals. However, finding the right NRI investment in India can be a bit tricky, given the legal angles, currency conversion, paucity of knowledge, and frequent scams. At the same time, you also need an NRI savings account that is encompassing and can help streamline your investment choices. IDFC FIRST Bank offers different NRI savings accounts, each fulfilling a different need that can help you invest with ease.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.