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Relocating to India? Here's help on money matters
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February 06, 2007 16:14 IST

Increasingly at Personalfn we are meeting Indians living abroad who are relocating to India. Usually such individuals have a significant portion of their assets in the foreign country; investments in India are usually linked to inheritance or savings made before shifting abroad. The task we are entrusted with is to help such individuals plan their finances. Here's how we assisted one such family.

We recently met a Person of Indian Origin who was based in the United States; he has now shifted permanently to India. Let's call this individual Sanjeev.

Almost all of Sanjeev's savings are in the US; in US mutual funds and bonds. He has no exposure to India in his asset allocation, although he does expect to inherit some Indian assets over time.

More about Sanjeev -

Sanjeev's investment details are as follows:

As mentioned earlier, since the client is now settled in India, and is certain to be here for the rest of his life, in our view, it makes sense to shift his assets back to India. Why do we say that?

Well, if you know you are going to be in India, and all your future incomes and expenses are going to be in Indian rupees, why take on the risk of being invested in US dollars?

In case the US Dollar were to depreciate vis-�-vis the Rupee, the value of your US assets would effectively erode (Read our view on the currency). This is not to say that no one should have money invested in other currency assets. From our perspective, one should evaluate such investment opportunities only when one has completed their investment plans for domestic assets.

Importantly, you should have that much money in another currency asset that is required to meet future needs (that need to be provided for in the other currency).

In order to reallocate his assets, Sanjeev will need to liquidate his assets in the US and transfer the proceeds to India. Since his daughter might go back to US for higher education in future he will require money (US Dollars) at that point of time. Therefore, in his case, the liquidation and then allocation of assets must be based on his needs in India as well as in the US.

Keeping this in mind we proposed to conduct his entire financial planning exercise in two phases. The first phase involved understanding of his needs in India and the US and accordingly liquidating his investments. The second phase involved, investing the proceeds in India.

Liquidation process:

Asset allocation based on the client's needs in India:

It goes without saying that our recommendation to Sanjeev (although very critical) was just a starting point.

First and foremost, it needs to be executed (investing in mutual funds, buying property) and then the plan needs to be monitored regularly. This is necessary as over time, Sanjeev's risk profile will change, as he gets older, he may not be comfortable with a higher allocation to equity, so a portion of his money will have to be shifted to lower risk assets.

Also the performance of the mutual fund schemes will have to be monitored. Given the nature of the task, it is best for Sanjeev that he engages the services of a professional and competent financial planner who can actively monitor his financial plan.

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