How to switch to Direct Mutual Funds as an NRI and save lakhs of rupees

Mutual Funds

As interest rates with an NRI Savings Bank account is quite low (3–5%), many NRIs decide to invest with mutual funds where they can expect 10–15% returns on their investment.

Mutual Funds through Banks — Regular Mutual Fund

When you have money lying in your NRI Savings account which doesn’t earn much interest, banks usually advise you to open a mutual fund through them and earn a higher return on investment.

Having very few options of opening a mutual fund, usually NRIs decide to invest in mutual funds through the banks. This decision however can reduce their final return significantly when compared to the next option I’m go to describe.

Direct Mutual Funds

Regular Mutual Fund sold by banks involve bank commission fees and their average annual return rate is around 10–15%.

Investing in Direct Mutual fund saves you bank commission fees and their average annual return rate is around 11.5–16.5%.

Taking Axis Bluechip Fund as an example, if you invest Rs. 5000 every month in Regular Mutual Fund through a bank, you would lose 36 Lakhs after 20 years when compared to returns from a direct mutual fund investment.

Example of Regular vs Direct Mutual Fund Returns — Axis Bluechip Fund (Source : axismf.com)
36 Lakhs Loss after 20 Years if you invested with Regular Mutual Funds through Banks (Source : https://groww.in/calculators/sip-calculator)

How can NRIs invest in Direct Mutual Funds?

NRIs cannot invest in Direct Mutual Funds through famous investment platforms in India like Groww. These platforms do not support NRI mutual fund investment yet.

You as an NRI can directly invest with fundhouses like Axis Mutual Fund, SBI Mutual Fund and start a Systematic Investment Plan (SIP) with a direct mutual fund. You will need an NRE/NRO Savings Bank account. If you do not have an NRE/NRO Savings Bank account, it must be opened through your bank in India.

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Disclaimer : I’m not a financial expert. This article is based on my personal research and investments. Research well before investing money.

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