NRIs have a distinct edge in building an internationally diversified winning portfolio across bonds, stocks and ETFs from around the world, at low costs and taxes.
Do you know India’s share in the world GDP is just about 3%? There are is a large investment opportunity from the world GDP you can tap outside India too.
Your savings can be deployed into variety of these stocks, bonds, funds, REITs and ETFs. This allows you to access a variety of investment options from various countries in an easy and low cost way.
One of the best places to build this investment portfolio is Singapore. The low or no taxation and a variety of options are a boon for the NRI based in Singapore.
So, while you may wish to return to India post-retirement, it makes ample sense to use your current tax status and time in Singapore to build an internationally diversified and winning portfolio.
As an NRI in Singapore, what all exposure can you get in your investment portfolio? What are the key points to note while investing?
Quite simply, you can invest in stocks, funds or ETFs from US, UK, Japan, Hong Kong, China and many other countries. Just be sure about how the particular investment will add value to your portfolio as well as the taxation for the same.
While most banks that you have an account with, will offer you platforms to trade or invest, it can be very expensive. Instead, what you can do is consider opening an account with Interactive Brokers, which has very low trading fees including for currency conversion and brings you investment options from around the world.
For example, you can buy a Vanguard S&P 500 ETF if you wish to take exposure to some of the best US stocks through a market index. You can even take exposure to technology stocks via the Vanguard Information Technology ETF.
However, you need to know where to buy these from. US has a withholding tax on income. Hence, it is better to buy the Vanguard S&P 500 ETF listed on the London / Ireland Exchange and not the US listed one. The London/Ireland exchange listed ETF has incurs half the withholding tax than the one listed in the US.
If you have to take exposure to the India large cap market via an ETF, you can do that too. No need to change the currency and yet get exposure to Nifty stocks via an ETF. If you want to buy direct stocks, you need to have a trading/demat account in India.
Apart from stocks and ETFs, Singapore offers another investment option in REITs or Real Estate Investment Trusts. There is a deep market there. Instead of buying physical property, which can be illiquid and maintenance heavy, one can buy REITs, specially those focused on commercial properties. For those who are conservative in their approach or looking for income, this may be one of the better options. Remember, REITs are traded in markets and are subject to price volatility.
The best part of being in Singapore is the low taxation. Singapore follows a progressive tax rate from 0% for upto S$20,000 to 22% for incomes above S$320000. There is no capital gain or tax on most dividends for individuals, including from REITs. Individuals are taxed only on the income earned in Singapore. Isn’t that great?
If you are in Singapore, what do you do for your portfolio? Please do comment and share.
Disclaimer: None of the investment products or platforms mentioned above are recommendations. You should consult your investment advisor before making any investment decisions. You have to take into account your individual requirements, tax brackets and risk profile to decided what suits your portfolio.