residents Indians (NRI) can now invest in a number of products that can serve as a pension for their old age, said Memon A. Kader, an NRI and the MD of Rehmat Capital, a financial advisory firm in India, run by his family. These products include the Systematic Investment Plan (SIP), Systematic Withdrawal Plan (SWP) and Micro Investments he added. However, he indicated that there was risk involved and that people should spread out their investments. An SIP is a method of investing a fixed sum, on a regular basis, in a mutual fund scheme, to build wealth over a long period, over 15 or more years. “It is useful for those who want to get their investments going, but don't have a large sum of money to invest.” It is similar to regular saving schemes like a recurring deposit, he explained. SIPs allow an investor to invest a prefixed amount with a mutual fund scheme at set intervals, and derive the benefit of fluctuating share prices and NAVs (Net Asset Value per unit). So, when the share price drops, the investor gets more units and when the share price moves up, he gets less. Over a period his cost of purchase averages out, said Kader. The SWP allows an investor the facility to withdraw pre-determined amount/units from his fund at a pre-determined interval (monthly). “It is a smart way to plan for your future needs by withdrawing amounts systematically from the existing fund you accumulated through SIP, either to reinvest in another portfolio or to meet your expenses. Your remaining money in the fund no longer remains idle, it keeps earning,” he explained. He said risk must be managed so it is important to spread investments and not only have a bank account, and added: “there is no guarantee whatsoever for bank deposits beyond Rs.1 Lakh and you've no legal recourse for any default beyond this amount”. “Though theoretically there are some risks in mutual funds, mutual funds in India are in the form of a trust. This means that the money belongs to the investors and is only held in the name of the trust. Although they come without any explicit guarantee of capital protection, mutual funds can give the investor peace of mind,” Kader added. He said times were difficult for many low-income Indians who have to support their families back home. However, there is a way to save, he said, with micro-investment products. “It means a very small amount from our monthly income can be invested regularly to create a substantial amount after some years which will be useful when returning home or when retiring.” The amounts could be, for example, SR50 or SR100. “This amount equals to a dinner at our favorite restaurant with the family,” he said. NRI workers can invest in these schemes promoted by the Indian government through all banks and financial services companies. “These investments are very valuable for our NRI community, especially for workers because it will be like a pension for them in their old age. The best part is that they can do it with a minimum of SR100 per month savings,” said Kader. He said there also emerging market funds Indians can invest in. In Saudi Arabia, the return posted in 2008/2009 by one fund, called CHINDIA launched by the Saudi British bank, gave 83 percent returns, said Kader. Anyone can subscribe to these funds by investing a minimum of SR5,000 and adding SR1,000 every month. “All educated Saudis and expatriates are investing heavily in these funds but our Indians, especially the worker community, are not aware of this,” he said.
