While investing the key parameters to watch for are returns and goal associated with the investment.
Equity does give better returns over the long term compared to other asset classes.
While investing we need to look at the treaties of tax done between countries which will help in avoiding taxation errors in the future.
We don’t want the IRS to call us saying that you have been avoiding taxes and you need to pay penalties for it. This also doesn’t bode well with the internal rules in the company you work for as well.
1.Direct Equity Investing
An investor can directly invest in stocks by opening a PIS account (Portfolio Investment Scheme) commonly called as a PIS account. This account has to be linked to your demat account. Investing in stocks directly needs a lot of time as you will have to be constantly looking for opportunities and studying about companies which is fruitful but not at the cost of the full time job you’re in.
Returns are higher over the long term but it will have periods of volatility, Risk is higher over the short term and this isn’t a good option if you’re looking to park money for short term.
Taxation is based on the report that is generated by your stock broker.
I would recommend Zerodha’s platform if investing through this route as the seamless experience will make it easier for investing in direct stocks.
Some Mutual funds in India do offer investments with them. Taking care of the taxation part in the USA is primary before venturing into them. The mutual funds here obtain a declaration stating that they will comply with IRS in case there is an under reporting of gains made and taxes not paid there. Although India has signed a double tax avoidance treaty with the USA. It is still not very clear whether you need to pay taxes on the gains in the USA as well. Few leading mutual fund houses avoid taking investments for US and Canada based investors as it’s still a grey area.
Mutual funds can be a better to way to passively take part in India’s equity growth and an equity mutual fund will give better returns compared to other asset classes.
Fixing goals while making an investment plan plays an important role.
Real estate does play a role in diversifying your investments. “Diversification is the holy grail of investing”. While it sounds attractive owning a physical asset there are certain drawbacks with investing in real estate. Some of them involve large ticket size, meagre returns when you compare against equity as an asset class, higher taxation and transaction costs, finding the right opportunity as it is not as transparent as other asset classes, low liquidity.
It should be a part of the overall portfolio for diversification but not a large part.
Having an FD through your NRE account will also serve a tool for returns on your overall portfolio and also be a way to diversify your investment. The safety grade being high and volatility being low to the asset class makes it an attractive form of return as the interest rates also tend to be higher.