Financial Guidance - MF Options for NRIs

Q. I am a 23-year-old mechanical engineer and have joined a firm in Sharjah as a service engineer from April 2011. My starting salary is 2500 Dirham plus another 500 Dirham for accommodation. I will be able to save close to 500 Dirham now and a little more after six months following a 500 Dirham hike. I am very much interested in investing in mutual funds for a short period, say, three to four years. I would like to know the best plans available to me. Since I am an NRI, please suggest to me the medium by which I can pay the amount. Also please suggest to me investment options other than mutual funds.
- Aravind Babu, via e-mail

A. Dear Aravind, an SIP is the ideal method for you to follow. For a period of three to four years, it would be best to have a mix of debt and equity – more debt (deposits, debt mutual funds) if you are wary of interim losses, and more equity if you do not mind some uncertainty in between, so long as you make more gains eventually. You could very well have a 50:50 proportion until you are comfortable with investing in mutual funds. MFs are the most convenient way to save and accumulate wealth for a long term. Some of the Indian mutual funds are likely to have offices in Sharjah or you could approach banks in Sharjah that distribute Indian mutual funds. Otherwise you could initiate the process when you travel to India next and issue cheques from your NRE or NRO account. The equity funds suggested are diversified equity funds such as HDFC Top 200, Franklin India Bluechip Fund or DSP Blackrock Top 100 Equity Fund. Among the debt funds, Templeton India Short Term Income Plan or Birla Sun Life Dynamic Bond Fund are acceptable for your debt category of investment. Other than these, you may consider an SIP in a gold fund, too. Reliance Gold Fund or Kotak Gold Fund both accept SIPs. In case you plan to buy property, you will first need to accumulate the larger sum required to buy property.