If you are an Indian living abroad for work purpose, for the last five years, and don’t have a robust financial plan yet, you must be worried about your post-retirement life.
While being overseas, wherein a percentage of your pre-tax salary gets invested towards your employee retirement plan, your other savings generally dabble in the stock market following funds that your friends and colleagues suggest. So, the question of how you could invest your hard-earned money effectively arises.
NRIs frequently consult investment advisors before investing their savings as they get confused between investing in their motherland with an emerging market with excellent prospects and grabbing global opportunities for a share in the tranche of well-established organisations with superior competitive advantages.
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To be honest, there is no straightforward answer. However, one can answer this question when the other questions that come along are raised. The most vital one is what your long-term financial goals are.
Once you are aware of your financial goals, you can plan for your investments in domestic economies and across dominating economies with the right strategy. So, where to invest for a secure post-retirement life, and how to keep your investment portfolio balanced?
Invest in your domestic land
As India is a growing economy, the financial markets have been resilient even during the tough times of volatility and lockdowns due to Covid-19. With funds outperforming benchmarks and the markets touching high records, investors have made profits and booked profits while keeping their investments intact, even during volatility, sensing more potential for growth.
Due to the second wave of Covid-19, the market has witnessed volatility, and funds have underperformed global peers. Over the past few years, the large caps led market had grown while mid-caps and small-caps are today taking over the lead. Attraction valuation and post-Covid market prospects are opening so many doors for sectors such as pharma, digitisation
and eCommerce dominated by the mid-caps-led market. During the volatility, small-caps have had quality growth stocks at attractive valuations, and mid-cap categories of funds on your portfolio at this stage could be beneficial for the long run.
With India continuing to grow significantly and the government’s aim to vaccinate around 40% of its population by September 2021, there are signs of a robust return to normal soon. Therefore, you can choose to keep investing in the Indian economy. Likely, the government’s continued expansionary approach will quickly increase the demand and business will be back as usual.
Go Global
Over the past decade, Indian markets and the United States markets have offered similar returns to investors. The DJI has generated a compounded return of 9.75% annually, while the Sensex has generated a return of 9.70% in the past ten years. Every global market has a unique opportunity to offer. The United States, for example, is a technology hub with a $20.8 Trillion gross domestic product (GDP) and $45.8 Trillion market cap. On the other hand, China is a manufacturing hub with a $14.8 Trillion GDP and an $11.7 Trillion market cap. Capitalising on opportunities in future-ready businesses by investing in these countries can benefit you in the long term.
Suppose you allocate 10% of your investible surplus in global markets, while 7% of this weightage is in developed markets such as the US and 3% in emerging Asia-Pacific. Naturally, you are more likely to draw better returns in such a case wherein keeping your portfolio balanced even through volatility.
Being an investor, it is crucial not to forget that either a single asset class or a specific market can constantly outperform. Additionally, the financial markets are cyclical; therefore, diversification ensures your portfolio remains stable through all the ups and downs during such cycles.
