Retire in India and live off interest payments?

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#151 Feb 6th, 2007, 20:03
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#151

Case Study: Relocating back to India

From personalfn.com, advise to an NRI relocating to India.

http://www.personalfn.com/detail.asp...2/2007&story=2
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#152 Feb 6th, 2007, 21:40
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#152
Capt -

Interesting link, although clearly a promotional piece. What they did with the case study was generally OK, but not much to write home about. Apart from vanilla financial planning and asset allocation - with some argument on asset transfer to India, not much there. In fact, the actions outlined could be rather poor under certain circumstances.

There is a good argument for reducing the currency exposure, particularly with Rupees as the base currency where a large portion of future outflows are likely, but transferring 90% of financial assets to Indian Rupees is a downright questionable advice. By the way, there are other currencies than USD and INR that can and should feature in your portfolio, if the assets exceed a minimum threshold (which is likely to be the case in instances such as one highlighted in the case study).

If and when we get to this situation, I'd definitely want to gradually increase asset allocation towards Indian Rupees (and otherwise diversify the currency exposure of my financial assets as I already try to do), but would perhaps never get to the allocation they recommend. There is a good case for diversifying away from dollar (to an extent), but not a good case for concentrating it all in Rupees.

One could critique other aspects, but I am not inclined to spend the time on it. It is worth reading to get exposed to some of the arguments and a point of view, but also worth keeping in mind that it might not be the final word - and might even be laced with conflict of interest on part of the adviser, as the advise increases the assets under their supervision.
#153 Feb 6th, 2007, 21:53
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#153
kmalik, broadly agree with you. Some observations of mine:

-An indian website will concentrate on Indian opportunities, through lack of worldwide knowledge. Similar, a US advisor will probably class India as a much riskier market than it may actually be.
-Investors are comfortable with what they know. I, for example,
will hesitate to invest in Russia, as an example. Same for some currencies.
-I feel asset allocation and diversification is key. If one is able to do this well with markets worldwide, all the better.
-In the Indian context, unless one is daft or filthy rich, I do not recommend portfolio investment services, since I know they are more interested in their sales and brokerages than your interests. Some of the advice I have heard from them is not worth repeating; you can do better with not too much involvement on your own.
-In the last few years, given the dollar rupee exchange rates, it has been generally more rewarding to stay with the rupee, even if some of your expenses are in dollars. The fact that a NRI still gets about a 5 percent interest on USD fixed deposits
adds a little to this.
#154 Feb 6th, 2007, 22:30
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#154
Capt - Thanks. All very sensible points, as usual.

- I believe in the situation of the type discussed in the case study, one does need advice / expertise that covers both India and the location one is locating from. My impression was that their advise was perhaps OK for the Indian end, but shallow on understanding of the US end (including the liability the financing of education in the US in the case study might entail, the tax implications of some of the moves, etc.). My point is consistent with your observation.
- I would also not want to invest in individual securities in Russia, etc. However, one can buy fairly diversified baskets of securities through mutual funds, exchange traded funds (my favorite) that yield diversification without requiring active management on your part at relatively low expenses.
- The commission angle is a concern in any financial advice. I'd strongly advise everyone to make sure they do not invest through the adviser.
- I understand the argument based upon the recent trends and myself believe in diversifying away from USD to a reasonable degree. However, you may find your argument strained against Euro or GBP over the same horizon. I'd not draw the conclusion from there to put all my eggs is the Euro/GBP basket either. I believe the diversification argument applies equally to the currency exposure as well, particularly as the next few decades will feature a complex dynamic on energy, raw material, competition and the colossal changes in demographics.
#155 Feb 7th, 2007, 13:15
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#155
Hey! My knowledge of economics and investment is zilch!

I think that, having moved indefinately to a country of high inflation/interest rates that it doesn't make any sense to keep my money in a country of low inflation/interest. But if I was any good at savings/planning/investment I'd have a heap more money instead of just enough to live on.

There is certainly truth on both sides of the Indian product quality thing. A number of the brands mentioned by YatraYatra are not Indian, even if they have manufacturing here; I do think that makes a difference.

Take my Tata Indica car, for instance. At three years old, a car in UK, unless it has been really mistreated, should be hardly showing the strain. There certainly should not be any problems like rust spots or rubber door seals falling to bits. My Indica (and it is low-milage) is more like a ten-year old 2nd hand British car. You can talk about the climate and the conditions: but wouldn't you expect that a truly local car should be better, not worse, at handling them?

Those who have been in the Indian stock market over the past couple of years must have had wonderful returns. Mutual funds returning 30%? Of course, that is what they are still advertising --- but how much longer can stocks rise like that?

<fascinating discussion... but I have to go out. See you later!>
~
Life gets aadhar every day.
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#156 Feb 7th, 2007, 13:45
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#156
Quote:
Originally Posted by Nick-H Mutual funds returning 30%? Of course, that is what they are still advertising --- but how much longer can stocks rise like that?
If I knew that I'd be rich
This is what I suggest. Pls keep in mind many people will disagree; but I find they are talking about maximising gains, while I talk about risk adjusted returns.

The first trick is not to expect more than 15 percent annual, long term... and I mean 5 years plus. If you get more its a bonus.

The second trick is to balance your investments and allocate assets...which means that when the stockmarket rises, you periodically take off some money from the table. Dividends in mutual funds are one way of doing this; else you can always sell.

The final trick is not to be greedy.

Also, keep in mind that the dividends in equity slanted mutual funds (or long term capital gains, ie gains longer than a one year holding period) are tax free. The highest income tax slab is at 33%; not a negligible amount.

And, for the slightly risk averse, a few balanced funds (about 70%equity, 30% debt) have given similar (30percent pa) returns over five years.

Does this mean we should all take our money and jump into mutual funds? Of course not, specially at these high levels of the stockmarket. But the stockmarket cannot be ignored. And here's some more reasons why

-the government(s) have, over the last few years, made small savings less attractive. Returns reduced on Post office schemes, ppf accounts threatened to be made taxable, RBI bonds made taxable.. I could go on. This is because the government is subsidising small savings, and doesnt want to/cant afford to do this.

-Inflation is at 6% officially, but I believe the real figure is a little higher. So inflation adjusted returns in traditional small savings or bank deposits are not more than 3 percent max. And keep in mind that bank rates have not been this high for quite a few years. (9.5 percent pa)

-The government(s) are simultaenously making investing in the stockmarket more attractive. Tax benefits, ELSS funds, etc are examples. Plus, only about 2 percent of domestic savings come into the stockmarket, and all concerned are salivating at the thought of raising this number.

-There is a move to have Employee provident funds invest partly in the stockmarket. So far shot down by the Left and not implemented, I feel this is a matter of time. So an Indian employee may find he is at least partly in the stockmarket, whether he likes it or not.

In a nutshell, the trend is and has been to make small savings unattractive from the returns or tax point of view, while simultaneously making mutual funds/stockmarket more attractive.

Add inflation to this mix, and one has to consider mutual funds/stockmarket, or risk capital erosion.
#157 Feb 8th, 2007, 22:47
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#157
Y -

Your confidence and pride in India and things Indian is wonderful to see and behold. As a person of Indian origin, I'd say: from your mouth to God's ear! Do not know if we atheists are allowed to say that

However, some of us like to base decisions concerning our economic well being on economic and financial analysis and principles. To be convincing, one needs rational arguments, not the nationalistic fervor or bias.

I did not agree with monkgonemad, but the relevance of country risk (highlighted by mgm) is undeniable and one can pay a heavy price for ignoring it. In a way, your posts share one characteristic in common with his/her arguments: highlighting one country risk while low balling the same for the other country, just the countries are reversed.

Different strokes for different folks, I guess. It also depends upon the financial objectives you have. I, for one, would continue to use and advise objective financial rationale and not nationalistic biases for making such decisions...
#158 Feb 9th, 2007, 20:13
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#158
Since we touched on this here, and since many foreigners, expats and NRI's on IM would be specially interested in exchange rates, an article from todays Economic times,

"Govt to let Re rise to bring inflation down"

http://economictimes.indiatimes.com/...ow/1581331.cms
#159 Feb 9th, 2007, 23:46
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#159
Errrrr....

Does that mean that the price of the rupee rises, ie we get less rupees for our pounds, dollars, etc?
#160 Feb 9th, 2007, 23:47
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#160
yep. and inflation is the one big domestic thing that can slow down the economy.

and fuel prices too, which have been benign recently.
#161 Feb 9th, 2007, 23:58
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#161
That's bad. For travellers and imigrants alike.

Having read the article again I understand: it is to reduce the inflow of foreign currency by making the rupee less attractive.

Not sure I follow much else of the reasoning
#162 Feb 10th, 2007, 01:00
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#162
unfortunately the rising rupee will hurt exporters/IT/outsourcing companies hurting their competitveness with suppliers based in other counties
#163 Feb 10th, 2007, 11:23
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#163
Quote:
Originally Posted by yatrayatra Nick

See my post earlier - we have to be prepared in a few years from now for the rupee hitting single digits to the dollar ; thus one dollar will get you maybe 4 or 5 rupees.

If and when India is truly a commanding economy it will be 1 rupee equals five dollars and then such bulletin boards will appear in california , vermont and all those beautiful places..

Yatrayatra,even though the scenario you are suggesting is unlikely i as an Indian traveller am having visions of travelling to many countries with that exchange rate.
#164 Feb 10th, 2007, 13:09
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#164
Quote:
Originally Posted by yatrayatra - we have to be prepared in a few years from now for the rupee hitting single digits to the dollar ; thus one dollar will get you maybe 4 or 5 rupees.
Sometimes it does not matter if the exchange rate is artificial.

When I first went to the US in the late seventies, the dollar got you a little below eight rupees. The Russian rouble was 11 rupees, but you could sell a packet of Chicklets (chewing gum) which cost one rupee in India for one rouble in Russia.

You got 38 zlotys to the USD officially in Poland in 1986, and got almost 700 in the black market.

The rupee is not free to the market forces right now. Who knows what will happen when it is, or which way it will go. Suppose the price of crude goes to 100 dollars a barrel?
#165 Feb 10th, 2007, 14:43
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#165
It is difficult to talk of any country's economy in isolation, and obviously impossible when it comes to exchange rates.

Isn't the USA economy a debt-ridden bubble just waiting to burst? Perhaps they may yet live to understand why they should have been trying for something more substantial that the Great American Dream!

YY... USA is certainly the imperialist of today. UK was the imperialist of yesterday. It is not british brand names that are taking over the world. There is no British Levi, Coke, Pepsi, Microsoft, etc etc... Show me an office with a computer running on a British chip, or with a British laser printer on the desk. Even what was British Steel (although at that time every pound of steel it produced cost the British taxpayer dearly) is now owned by India.
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