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Not all AMCs allow NRIs to invest in their schemes

LiveMint logoLiveMint 24-05-2017 Srikanth Meenakshi

Could you clarify which of these asset management companies (AMCs) allow online investments for NRIs based in the US? I have an MFU online and a myCAMS account.

—Ravikiran R

Not all mutual fund companies (or AMCs) make their funds available for investments to customers who live in the US or Canada. This is due to regulatory constraints and restrictions in those countries. However, fund houses, such as Birla Sun Life, UTI and SBI MF do make their funds available. All these fund houses allow investment through their own online portal, and hence you would be able to invest online in these funds. They may require (differs from AMC to AMC) some paperwork initially to set up your account in the website. When it comes to aggregator websites or apps such as the one you specify, they may have additional documentation to go through before they accept investments from you. It would be best to directly get in touch with them for clarifications about such specific needs.

I want to invest Rs40,000 a month in mutual funds. What should I do? Please suggest some good schemes to invest. My age is 28, and my investment horizon is 10 to 12 years. My existing monthly SIPs are—SBI Pharma (Rs2,500), SBI FMCG (Rs2,500), Birla MNC (Rs2,500) and Reliance ELSS (Rs10,000). Someone has suggested to invest in these funds—Motilal Oswal Long term (Rs10,000), Kotak Emerging Equity (Rs7,500) and Motilal Oswal M-35 (Rs7,500). Please advise if this is okay.

—Ankit

Many investors, when they want to start investing in a systematic investment plan (SIP) portfolio, first think about how much money they can invest every month. From this, they go straight to choosing the schemes to invest in. This process leaves out a couple of crucial steps that are required to ensure that they invest in a portfolio of good funds and, more importantly, one that would suit their needs. True, ultimately, one does invest in mutual fund schemes, but it is important to follow the process to get there rather than just choose, based on some scheme-level criteria such as recent performance or star rating. So, what are the couple of steps in the process that need to be taken between deciding the amount and choosing the schemes? They are to choose the asset allocation of the portfolio and to choose the fund categories based on the asset allocation. These two steps will ensure that the portfolio you are putting together will align with your requirements and your appetite for taking risks with your investments. Asset allocation will give you broad contour of how much money you should be investing in the stock market (through equity funds) from your monthly investment, and how much should go to the debt market. This step will let you calibrate the risk level of your portfolio at a high level. Choosing the right fund categories within these asset classes next will let you fine-tune your risk level further. It would also ensure that your portfolio is adequately diversified within the asset classes you have chosen. Additionally, these steps will also help you understand your portfolio and its components well before you start investing.

In your case, I see that you are a young person with an existing SIP portfolio. Since you have a long-term horizon of 10-12 years, you should look at an all-equity portfolio at this time, and that indicates that you are an ambitious, high-risk investor with an eye on generating high returns over the term of your investing.

Even considering these factors, the portfolio that you have currently is a high-risk portfolio that has little or no downside protection. Currently, you are investing in three thematic funds (funds that focus on a narrow range of the market) and a tax-saving fund. Let’s take a relook at your portfolio following the process of identifying the asset allocation and scheme categories before deciding the funds. For an aggressive long-term investor such as yourself, an allocation of 90% to equity funds would be appropriate. And within the scope of equity fund categories, you should have a mix of large-cap, diversified, and mid-cap funds to get a wide coverage of markets and fund management styles. Also, a balanced fund would be in order to bring in the 10% debt component into the portfolio. Considering this, I would keep the current ELSS fund in your portfolio for the diversified fund component. Apart from that, I would recommend a large-cap fund (Franklin India Blue chip) for Rs6,000, and two mid-cap funds for Rs4,000 each (Invesco India Mid-cap fund and UTI Mid-cap fund). For the balanced fund, we could go with HDFC Balanced fund for Rs16,000 (this fund would have about 25% allocation to debt bringing the overall portfolio contribution for debt to 10%). I understand that this is a significant diversion from your current and proposed portfolios, but this approach is likely to yield high, market-linked growth without undue risks.

Srikanth Meenakshi is co-founder and COO, FundsIndia.com.

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