2 issues NRIs need to address on priority in their personal financial matters

2 issues NRIs need to address on priority in their personal financial matters

The numerous interactions that we have had with NRI customers over the last few years, has only reiterated to us that the challenges they face related to Financial Planning are, in many ways, unique. Dealing with two different currencies, two different set of tax rules, assets in two or more geographies with their own estate planning laws, restrictions on certain investments in India, opportunities to avail of special products, all this makes it clear that the challenges for NRIs are different and much more complex as compared to resident Indians. We have written earlier about these matters and you can find the article here.

In this article, let’s look at 2 specific issues a bit more in detail.


Affinity towards real estate and reluctance to sell

Most NRI customers we have engaged with have substantial assets in India and as is the case with most residents as well, their assets are invariably real estate heavy.  One house is a given, and many of them do have multiple houses.

So, why is this an issue? Most NRIs who avail of financial planning in India are clear that they will return here. However, rarely do any of them have clarity on when that might be, and it is usually “many years later”.

While the original reason for having acquired a house may have been appreciation or perception as a safe asset, their reasons to hold on to them, are however not the same. In many cases the plan is to settle in their own house once they return to India. For them, it is comforting to have a house in their “home country”, where there is no ambiguity in taxation or right to title etc. It is an emotional bond that they retain, almost like their ultimate safety net. But in such situations, rarely do things actually work out the way they have planned.

Most NRIs are used to much better lifestyles once they move out of India, since thanks to the surplus earnings available, their lifestyles get upped automatically. Having done this for years, how feasible is it for them to get back to a house purchased many many years back? Their preferences are likely to have changed, given their experiences outside the country. Is the size of the house going to be sufficient? what about the locality? Are there some amenities which have now become non-negotiable, but may not be available if one were to stay in the house currently purchased? These are some questions worth pondering over.

If the reasons for retaining the real estate is not to occupy it sometime in the future, one will have to periodically evaluate if real estate as an asset class is giving you the expected returns and is sufficiently liquid. With time, the value of the house as well as condition of the house/society/locality can erode considerably. For someone who is going to be away from the country for many years, it might also be unrealistic to be able keep track of these aspects, since valuations of real estate are also very subjective. In such situations, monetizing the current house and investing the money in assets which is best suited as per goals will allow one to accumulate a sizable corpus.  This will be available to invest in a house as per needs on return.


Lack of access to professional advice

This is true of a huge majority of NRIs we interact with. Their access to advice, especially on Indian investments, is limited to their bank RM, and maybe some insurance salespeople. As a result, their portfolios are filled with insurance policies and ULIPs which makes limited sense compared to their financial goals, considering that these products lock in money for long periods, give below par returns and play havoc on their cashflows, not allowing them to invest in more suitable and better performing products. To add to it, on every visit to India a new ULIP or endowment policy is sold to them with some very imaginative story.

Another reason why this happens is because the NRI customer is happy that the bank RM has “helped” them with their foreign currency requirements, and therefore feels obliged to purchase a policy which gets pitched to them as an after-thought. It is one of the oldest sales-tricks in the book  and is important for NRIs to not fall prey to it.

Good financial advice which takes your goals, your unique challenges as an NRI into account and incorporates various future scenarios, is available to you in India. There will be a fee attached to it but it will be worth it, since it will help you tie up your entire finances together.  Of course, one will require a planner and tax person in country of current residence too.

This will not only ensure that one has a plan which is totally customized to one’s situation, it will steer you clear of wrong choices currently being offered to you for wealth building. The peace of mind which you get, when somebody also ensures you action all the small and currently inconsequential but need-to-do list of financial items like estate planning, closure of resident accounts, health insurance, EPF transfer, timely filing of tax returns and refunds, etc., are added bonuses.


Finwise is a personal finance solutions firm that helps both NRI and resident individuals and families plan for their financial goals, follow their passions and achieve financial independence.

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For advice, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.


Image credit: Mantas Hesthaven, Unsplash


Mirror, Mirror, On the wall, Which is the biggest risk of them all?

Mirror, Mirror, On the wall, Which is the biggest risk of them all?

“If the highest aim of a captain were to preserve his ship, he would keep it in port forever” – Thomas Aquinas


With the market indices at all-time highs (the Sensex touched 40000 and the Nifty touched 12000 on 23rd May 2019, post the election results), it will be pertinent to congratulate those retail investors who have benefited from it. They have benefited because they have stayed invested through the bad year that 2018 was, and therefore benefited from this run up in 2019.


Such investors are in a minority today. Most investors either have never considered equity due to fear and lack of awareness or keep their investment to the minimum because they do not want to take the “risk”. By staying away from equities, they avoid a “risky” investment and invest their hard-earned money into other “safe” investments – bank fixed deposits, corporate bonds, gold, real estate.


But, is this really less risky? What investors fear in equity is the volatility that is associated with it. By investing in less-risky avenues, one is avoiding this volatility. When one looks at risk in this way, defined as “volatility”, then yes, equities are riskier.


But, as an investor, the actual risk that you should be worried about is not achieving your financial goals. After all, of what use is the avoidance of volatility risk in the short term, if one is unable to meet one’s financial requirements in the long term?


If you are investing a sum of money without a particular goal and time-frame in mind, then you are making 2 mistakes with your money.


  • One, you are not setting any expectation from your investment and therefore cannot review its performance over the right periodicity, and take appropriate course corrections.
  • Two, you will unnecessarily track the movement of your investment frequently and get impacted by the volatility, and since you don’t have a goal or a target in mind, you will move to take hasty short-term decisions with that investment, maybe at a loss.


To understand this better, let us look at two commonly occurring scenarios


  • A invested Rs 500000 in shares on the advice of his good friend at work, who traded frequently and hence was “knowledgeable”. His friend said that markets are doing very well and if he invests now, he can get a good return in a short time. Instead, 4 months after he invested, the market saw a steep correction and A saw his capital come down to Rs 400000. Not wanting to lose further, A sold the shares at a loss, in 6 months.



  • B bought a second house in an upcoming suburb and took a home loan of Rs 80 lakh for this purpose. He bought this house because the suburb was slated to be close to the new airport and as per everybody he talked to, the area was slated to explode in a few years. Unfortunately, the house took 3 more years than planned to get possession, and the location still hasn’t developed to that extent, and hence isn’t yielding a decent rental. B still has nearly another 10 years to repay of the loan, and the outstanding loan is more than Rs 60 lakhs.


Do these sound familiar? So, what went wrong? In both these cases, the investment was neither planned, nor reviewed, with an underlying purpose. And hence, while the vehicles (shares, house in suburbs) themselves may not have been poor investments, wrong actions were taken (sell shares early, hold on to the property too long).


The first step in investing is to identify what is the goal one is investing for, and what is the time horizon that one is investing for this financial goal.


Once one has identified the goal and the time horizon, then the logical next step is to identify the correct asset class (or mix of asset classes) that one should invest in, in order to achieve the financial goal in the most efficient manner.


This should, of course, be done while keeping in mind one’s risk appetite, but years of investing as well as observing investors, leads me to say that risk appetite is not something that is static – this evolves over time, through one’s experiences as well as knowledge.


Once one looks at the investing process in this fashion, volatility as a risk is something that gets taken accounted for while taking the investing decisions. And hence is not something that as an investor should worry you, since you have planned for it.


In order to achieve one’s financial goals, it is important that your investments not only grow at the right pace, to create adequate wealth to meet your goals, they should also be in the right asset classes so that you have the money when you need it.


By investing in so-called “less-risky” avenues, one is putting a sort of ceiling on the returns one can earn, by sacrificing them at the altar of short-term volatility. In addition, one is actually exposed to both liquidity as well as inflation risks.


By not taking “risks”, one ends up encountering the biggest risk of them all – not having enough money when one needs it, and in the right form so that one can access it easily without any trouble.


So, do yourself a favor and look in the mirror and ask yourself this – do you know what goals your investments are helping build wealth towards? And how many of your investments are actually helping you create wealth that is both, beating inflation and helping you meet your goals?


Finwise is a personal finance solutions firm that helps individuals and families plan for their financial goals, follow their passions and achieve financial independence.


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For consultations, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.


Image by Gino Crescoli from Pixabay


You spend across the globe, do you also invest internationally?

You spend across the globe, do you also invest internationally?

One of the key pillars of building a stable yet strong investment portfolio for your long-term goals is Diversification. The objective of diversification is simply to “not put all your eggs in one basket”. Ie. apportion your money across different investments, in order to reduce risk. Conventionally, diversification for retail investors has meant the following –

  1. Invest across asset classes – eg. Equity, Debt, Gold, Commodities, Real Estate
  2. Invest across categories – eg. within Equity – large/mid/small cap, within debt – liquid, duration, credit risk

One key area available for diversification, yet, not taken advantage of by the retail investor is – Geography. Think about it – while we all agree that as a country India has a great long-term future and is one of the fastest growing markets in the world, from a risk perspective, having all your investments in one country – isn’t it another way of “having all your eggs in one basket”? While during happier times your pure Indian portfolio might grow healthily, what about the volatility risks during uncertain times (eg. global recessions, oil prices peaking – haven’t we seen these before?) when global money flows out of emerging markets such as India?

One key factor that large and HNI investors use successfully to not only de-risk their portfolios but also take advantage of global growth cycles is investing internationally. This has many advantages

  • Companies such as Apple, Google, Amazon, Facebook, Netflix – are driving huge behavior and consumption changes across consumers. And none of these are Indian. Investing internationally means having a finger in this pie.
  • Most clients we meet today have a significant portion of their goals planned abroad. Eg. Children’s foreign education, International holidays every few years both before and after retirement, destination weddings abroad. Investing internationally helps you plan for these goals better.
  • While India is a higher-growth market, it is also a higher inflation country, and hence its currency depreciates against most developed country currencies eg. Dollar, Euro, GBP. Investing abroad allows you to take advantage of the rupee depreciating and adds to the gains.

Remember though, investing internationally also has its share of “new” risks that one needs to plan for. Eg. knowledge of global cycles, international geo-politics and its impact as well as currency risks. That said, there are significant investment opportunities available today that helps us invest internationally. More importantly, not investing internationally may be a bigger risk over the long term, keeping in mind the increasing inter-connectedness the world is moving towards.

It is also not something that a retail investor can DIY. It is important to reach out to a trusted financial advisor who can help you sift through and find these opportunities. For our clients, who have anywhere between 10-25 years left for retirement, we recommend at least 10-20% of their investment portfolio should be invested abroad, both to take advantage of global investment opportunities as well as act as a hedge during volatile times.

Going on international holidays or spending on international products – a good part of your expenses goes towards international companies. Then, why haven’t you invested a decent part of your inve/stments in them yet?

Finwise is a personal finance solutions firm that helps both residents and NRIs plan for their financial goals, follow their passions and achieve financial independence. For consultations, please reach us at getfinwise@finwise.in or +91 9870702277/9820818007.

Image by stokpic from Pixabay