How and where an NRI should invest?

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I am an NRI and working in Europe. I want to invest through SIP.

Goal- Child education
Time period -20 years
SIP- Rs 8,000 (annual incremental increase 10%)

My query-
Q1- Multi cap or large-cap? I prefer multi-cap funds because of diversity. But I do not know which one will be a good performer. Any specific suggestion?
Q2-I will revaluate a fund after 10 years and rejudge if I want to stay in this fund or switch to another one for the next 10 years. Is it a good strategy?
Q3- 20 years is a long term period so I think only equity would be good as I am willing to take a risk and don’t need a debt portion. Do you agree?
Q4- Why should I not go for international funds so that I get a hedge against forex. Most probably my child will need this money for international education. Any international multi-cap fund if you can suggest?
–Karan Sethi



Harshad Chetanwala, Co-Founder of MyWealthGrowth a mutual fund advisory firm, based out of Mumbai responds:

SIP of Rs 8,000 per month that annually increases by 10% will help you to create a corpus of Rs 1.23 crore assuming 10% return p.a. at the end of 20 years. Usually, we consider inflation of around 5% in education. In such a case the present cost of education will be ~Rs 43 lakhs. You may like to have a look at this number and check, does this match the education you have in your mind in present cost terms.

Ideally, you should diversify in more than one fund and it is better for the long term. A good mix of large-cap & Flexi cap can work for you. I would suggest Mirae Asset Emerging Bluechip Fund / Mirae Large Cap Fund (Rs 2,500), Parag Parikh Flexi Cap Fund (Rs 3,000) or UTI Flexi Cap Fund (Rs 2,500) begin with your investment. Long term thinking is important while investing in equities and I am glad that you are thinking from a long term perspective.

You should review your mutual fund portfolio once every 6 months or every year just to check on the progress and how your investments are doing. 10 years is a very long time for review. Review not necessarily should result in redeeming from funds and investing in funds that are on the top at the time of review. You should only reconsider redeeming from the fund, if the fund consistently underperforms its peers from two quarters or when you are nearing your financial goal.

On investing in international funds, you can look at allocating around 10% -15% of your investment. However, the return potential will depend on what geography you would like to invest in. If you would like to keep it simple then it is better to build your equity portfolio through mutual funds in Indian companies as you have more information about the prospects and growth potential of the companies and economy.

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