Wd40 wrote:Currently my allocation is 35% Indian equity mutual funds, 65% Indian fixed deposits, 0% real estate.
Clearly you're very heavily biased toward Indian investments, so India's financial fate is thus your financial fate, too. I don't recommend betting entirely or predominantly on one country, even if you're planning to retire in that country. Consider Japan, for example. Japan's Nikkei 225 stock index hit an all-time high of nearly 39,000, on December 29, 1989. As I write this it's about 16,600, down about 57% from its all-time high. Granted, you'd be doing better than that if you yen cost averaged in Japanese stocks over decades, and also because some of those stocks paid/pay dividends. Also, there has been very little inflation in Japan. Even considering all that, it would not have been good taking a bet only or predominantly on Japan, even if you never left Japan. And Japan's economy is the third largest in the world, even today (China passed Japan well after 1989), while India's is the 7th. There's a bit more risk in being smaller, other things being equal.
One reasonable approach might be to shift, via rupee or Singapore dollar cost averaging, into something like VWRL. (VWRL is one possibility, but it's only an example. Note that VWRL includes a fraction of Indian companies, roughly in line with India's position as the 7th largest economy in the world. But mostly it's not Indian. The biggest fraction of VWRL would be invested in U.S. headquartered medium and large size companies, but that's no surprise since the U.S. is the largest economy in the world.) You could decide how much that should be as a percentage of total assets, but I think 0% is the wrong answer.
OK, after that, I'd take a look at whether your investments are low cost. What is the total management fee on those mutual funds? VWRL is about 0.25% per year, excluding trading costs, currency exchange costs, and any taxes. (VWRL itself pays some foreign taxes, internally. The fund issues annual reports describing those foreign taxes it pays on the dividends and gains, and ordinarily those foreign taxes are creditable in your domestic income tax system -- for example, if/when you're subject to Indian income tax. For instance, when VWRL receives a dividend on General Electric stock, it pays a 15% U.S. tax before crediting that dividend back to the fund.) It's not at all uncommon for Singapore's unit trusts to charge 2% or more per year, or about 10 times what something like VWRL charges. This is a huge difference, of course. Taking a quick look at India's financial markets (something I haven't done before), it looks like the index fund market in India is quite poorly developed right now. There are several index funds in India that track domestic Indian stock indices (e.g. NIFTY). But I haven't been able to find ex-India index funds available on Indian financial markets, much less low cost ones. So it's quite difficult to diversify internationally through something traded on an Indian exchange, it would appear. If you want to reduce your exposure to India from near 100% to, say, "only" 80% then it looks like you'd have to go offshore to do it well.
I say "near" 100% because some Indian companies that you own, through your mutual funds, are multinational companies, e.g. Tata. Their success depends in part on what happens to their businesses outside India. So you're not 100% all-India, not quite. But you're nearly that. That wouldn't be my preference. (See above re: Japan. Many Japanese companies do substantial business outside Japan, too.)
If you're planning an early retirement then yes, you'd be skewed the way you are toward less volatile assets. That said, you might still want a bit
of international-ness particularly since the rupee can be volatile, and many retirees still take trips abroad to ski, visit the Grand Canyon, or whatever and still care to some extent about other currencies. I love the low cost "target" index funds, as I mentioned, but unfortunately that seems to be a U.S.-only thing in their extremely well developed financial markets. (Maybe somebody is going to revolutionize investing for the great and growing Indian middle class and introduce low cost "target" lifecycle index funds to India.) Some Indian banks offer foreign currency denominated fixed deposits, but those seem to be high cost offerings on average. Maybe there's a low cost international bond index fund available? Let's see.... Yes, there are: VECP, VETY, VGOV, VUCP, and VUTY. Those are Vanguard's non-U.S. exchange-traded index funds, traded on the London Stock Exchange. They all charge 0.12% management fees annually, so that's quite excellent. (Only beaten by Vanguard U.S.) There are three government bond funds (U.S. dollars, U.K. pounds, and Eurozone) and two corporate bond funds (U.S. dollars and Eurozone). The government bond funds are obviously safer/less volatile/lower yielding than the corporate bond funds. You'd have to look at the other roundtrip costs I mentioned to decide whether it makes sense to Singapore dollar cost average into such funds, but there you go.
No, I don't get commissions on any of this stuff. Nobody does, as far as I know. Vanguard, the company, is owned by its investors -- it's a mutual society organization, much like a co-op. I'm using them as an example and not necessarily recommending them.