If you are far from home, there are more ways you look to reconnect with your home. For all those NRIs who are looking for a way to reconnect back home, making investments in India is one such way. Suppose you are thinking about mutual funds as a tool to get started; there are five important factors you need to know before investing in mutual funds in India. So, fasten your seatbelt, curious NRIs; we are about to get to know the important things you need to be aware of while investing in mutual funds.
What is a Mutual Fund?
A mutual fund is a pooled investment. We know the struggle of investing a single stock, you do not have to do that anymore. You can choose a mutual fund instead. A mutual fund is when a middleman (typically an asset management company) buys a stock and pools smaller values from a larger number of people to invest in that stock.
If you are an NRI, you can surely choose asset management companies like Groww, open a Groww NRI account and get started. But, before you do get started, there are a few things you need to know. Let us get started.
5 Important Things Every NRI Needs to Know Before Making Investments in Mutual Funds India
The important attributes you need to know are:
1. Do You Completely Understand the Indian Mutual Fund Market?
The Indian mutual fund sector has seen great growth over the past decades. This growth has given rise to schemes that can cater to different needs. If you are an NRI and are planning to invest in mutual funds in India, you will need to keep an eye on the following:
a) The regulatory environment of mutual funds: NRIs need to follow the Foreign Exchange Management Act or FEMA, which actually governs investments in India. Make sure you keep a close eye on FEMA and abide by the required regulations for the long run of your investments in India.
b) Tax implications for NRIs: Taxation is a major factor of consideration when investing in Indian mutual funds. Understanding the tax laws and how they interest you with your money is essential when you are an NRI investor. You also need to consider the Double Taxation Avoidance Agreement and look out for some professional advice on the go.
2. What are Your Strategies for Long Term Success
Investing in mutual funds is a long-term aspect, and you must know that. Yes, mutual funds do not have a fixed tenure, but for sure, they work well for the long term, or so do historic performances. When you invest for the long term, you can't just do it bluntly; you will need a lot more to know about your objective. So, ask yourself a few questions. Questions like, what are your long-term goals, and what are the strategies you need to use for these long-term goals?
If you are an investor with a high-risk appetite, you might want to choose options that suit you the best, and vice versa. Investors with high-risk appetites would preferably choose options such as mutual funds that are a little more volatile than low-risk funds, debt funds, and more.
Moreover, you can also seek investment methods, such as investing in a lump sum or investing through SIP. Both these factors will produce slightly variable outcomes. Therefore, you can compare the two options and identify the one that suits your goals.
3. Have You Looked Up the Process to Invest in Mutual Funds in India
If an Indian resident is investing in mutual funds in India, the process will vary from NRIs investing in mutual funds in India. This is why you will have to look up the process closely. Understand the documents you will have to hold and the steps you need to take in order to invest in mutual funds in India. There are two ways you can do it: you can directly invest in the mutual fund, or you can choose to invest in the mutual funds through an AMC. You also need to be aware that a few AMCs will not allow you certain NRI accounts.
4. Do You Know How You Can Redeem Your Mutual Funds?
Redemption of your mutual funds is one of the most important factors you need to know. Though you might think for the long term and want to keep your funds that way for a while, all our thoughts don't always work. Long-term investments could be shortened by certain needs, and you might have to redeem your mutual funds before you plan. You never know what the future holds; therefore, it is best if you learn the redemption process before beginning your investment in Indian mutual funds. The process might be simple, but you can't leave out the charges of your AMC, exit load, and taxes.
5. It is Time to Understand the Calculation of Capital Gains for NRIs
You might wonder why understanding capital gains is important. It is quite important if you ask us. You need to understand your capital gains to understand the taxes implied in them. Moreover, you will need to understand capital gains to identify the exact amount of returns you have made or are making through your investment. This makes sure you set realistic goals for your investment and also simultaneously ensures you do not make any wrong assumptions about your returns from it.
India is calling out to you folks out there who are working hard in different countries. It's time to put some money into smart investment tools in your motherland.
Conclusion
Now that you know the primary elements of investing in mutual funds in India, what is the wait for? You can get started instantly, everything can be done online, with just a few steps. There is no need for you to visit India in person to get things started. Happy Investing!