How NRIs Can Build a Diversified Portfolio:
Building a smart and diversified investment portfolio is key to long-term wealth creation. For NRIs and HNIs, the challenge is twofold—making the most of opportunities in India while also accessing global markets.
This guide explains how NRIs can balance risk and return by creating a well-diversified portfolio across geographies, asset classes, and currencies.
Why Diversification Matters for NRIs
Diversification reduces risk by spreading investments across different assets. As an NRI, your income and financial obligations may span countries, so it’s important to not rely entirely on one country’s market or currency.
For example, if you’re earning in USD but investing only in India, you’re exposed to INR depreciation. On the other hand, investing only in US stocks may make you miss India’s high-growth opportunities.
Step 1: Define Your Goals and Risk Profile
Start by asking:
- What are your short-term and long-term goals?
- Are you investing for retirement, buying property, or children’s education?
- How much risk can you afford to take?
A 30-year-old NRI may choose more equity exposure, while a 55-year-old may prefer capital protection and steady income.
Step 2: Diversify Within Indian Assets
NRE and NRO Deposits
Ideal for stable, low-risk returns. NRE FDs are tax-free in India and repatriable. NRO FDs are taxable but useful for local expenses.
Mutual Funds
NRIs can invest in Indian equity, hybrid, or debt mutual funds through NRE/NRO accounts and a compliant KYC/ FATCA process.
Example: An NRI in Dubai allocates 40% to Indian large-cap funds and 20% to short-duration debt funds to manage risk.
Real Estate
Still a popular asset for NRIs, especially in Tier-1 cities. But real estate should not exceed 20-25% of the portfolio due to liquidity and regulatory issues.
Indian Stocks (Direct Equity)
If you’re confident in analyzing companies and have time, use the Portfolio Investment Scheme (PIS) to invest directly in Indian shares via a registered broker.
Tip: Limit single-stock exposure to avoid concentration risk.
Step 3: Add Global Exposure
US and International Stocks
Use platforms like Vested, INDMoney, or Cube Wealth to invest in global stocks and ETFs using India’s Liberalized Remittance Scheme (LRS).
Example: An NRI in Singapore uses ₹10 lakh annually under LRS to invest in S&P 500 ETFs, US tech stocks, and gold ETFs.
Global Mutual Funds
Many Indian AMCs offer feeder funds that invest in international funds—ideal for passive exposure without currency conversion hassles.
Offshore Insurance and Pension Products
Consider structured insurance-linked investments or pension plans available in your resident country. Just ensure they match your financial goals and are not overly expensive.
Step 4: Include Alternative Assets
You can add digital gold, REITs, or even curated startup investing platforms for advanced diversification. However, restrict such investments to 5-10% due to their high risk.
Example: An NRI in the UK allocates 5% of his net worth to a mix of Indian REITs and international crowdfunding platforms for real estate.
Step 5: Don’t Ignore Currency Diversification
Holding assets in INR, USD, and other stable currencies like GBP or SGD helps you manage currency risk, especially if your family lives in India but your income is abroad.
Tip: Rebalance your portfolio annually to keep your currency exposure in sync with future goals.
Step 6: Tax Efficiency and Repatriation Planning
Use NRE accounts for tax-free returns and easier repatriation. For global assets, understand the tax rules in your resident country and avoid double taxation by leveraging DTAA agreements.
Always declare your foreign income and investments as per the laws in both countries to stay compliant.
Final Tips for NRIs
- Use a mix of Indian and global assets for better balance
- Avoid emotional investing in just property or gold
- Keep sufficient liquidity for emergencies in both countries
- Monitor portfolio performance at least once every 6 months
- Consult a financial planner who understands cross-border taxation
Conclusion
As an NRI or HNI, you have access to a wider pool of global and Indian investment options. But with great access comes the need for greater clarity. A diversified portfolio helps you reduce risk, optimize returns, and meet your financial goals across geographies.
Start small, stay consistent, and let diversification do its job.