Tag Archives: Investment

Widget, widget on the wall, Which is the Best Investment of all?

Finally the tool to compare investment options is here.

Its configured for Indian Tax Rates for FY 2017 -2018 and works pretty accurately – I tried to test as much as I could but feel free to point issues if you find some.

To use the tool simply input your Investment amount and the Total income before this investment. That will calculate your tax bracket.

Then choose the category of investment and input your expected rate of return and the tool will give you the comparative pre and post tax earnings.

Its that simple!

For applicable tax rates refer to – Capital Gains tax for NRIs- It’s not that simple


Capital Gains tax for NRIs- It’s not that simple

As an NRI, you would have wondered many times, what parts of your Indian Income are taxable and what are not and trust me you are not alone.

Under the Indian Income tax act, the tax rates, deductions from income, exemptions from taxation all change depending on the nature of income and residential status of the individual. With the ever changing tax provisions, even if you searched online the chances of finding the information you are looking for would not be easy and filtering out the tax provisions that are applicable to an NRI is even more difficult.

Not being able to find consolidated tax provisions on common investments used by NRI’s I decided to compile the information myself and hope that fellow NRI’s will find it useful.

NRI’s mostly invest in Fixed Deposits, Bonds, Mutual Funds, Stock and Property which would generally give rise to income under Capital Gains or Other Income (Bank Interest or Dividends) under the Indian Tax laws.

I have tabulated the provisions that an NRI should be aware of for FY 2017-2018 (click on table to open in new window)



One of the most interesting things to note is that the basic tax free exemption is not available to an NRI on Equity Investments.  What that means is that if an NRI gained 2,50,000 Rupee by investing in stock market the whole 2,50,000 Rupee is taxable. If these gains are long term (asset held for more than 1 year) then there is no tax liability but for short term gains the tax rate is @ 15%. So an NRI would pay Rs.37,500 in taxes, the income would not attract any tax in hands of a resident Indian.

Another interesting fact to note is that the gains on redemption of Sovereign Gold Bonds are not chargeable to tax if held till maturity.

With difference in tax rules being different in different countries an investor should consider the tax domicile of the investment to maximise returns. In Singapore and Hong Kong the Capital gains, Bank Interest and Dividends are not taxable, however in USA and UK these income are taxable.

For example if an NRI bought a mutual fund in India that returned 20% over a period of 6 months then his gains would be taxed at a flat rate of 15% resulting in a post tax return of 17%. Buying this same fund in Singapore would have been as the gains are tax free and the investor pays no tax.

Similarly for bonds the interest is taxable in India and taxed at the marginal rate based on your income bracket but tax free in Singapore and Hong Kong.

E.g . An NRI whose total income is over Rs. 10 lac (30% tax bracket) buys a bond that pays 9% interest p.a. The post tax yield of this investment would be 6.3% . Add to it the cost of transferring funds to India of around 0.8%, the yield drops to 5.5%. If the plan is to remit the money back to Singapore on maturity, which will cost another 1%, the investment would yield 4.5% only.

These are just 2 examples to get you thinking. There innumerable scenarios that I can come up with based on different countries of residence and each individuals tax profile. All I would like to highlight is that an investor should not underestimate the impact of taxation and ancillary costs while making investment decisions and look at all aspects before making an investment decision.

Watch out for an investment comparison tool that I am working and will post it here very soon. Till then keep reading and sharing.

Over 5% annualised return with Low Risk Funds in 3 months

Close to 3 months since I first talked about the Low Risk funds that are liquid and generate good returns in my post – Good returns and Low Risks with Funds that Invest in Singapore Bonds and its great to see that 2 funds have generated over 5% annualised returns in 90 days.

United SGD Fund and Fullerton Short Term Int Rt have gained 1.44% and 1.18% in this period clocking annualised gains of over 6% and 5% annually.

Fund Performance 3 months

My personal favourite Nikko AM has lagged behind at 2.64% annualised but still much better returns than a bank deposit, Though I must say that mid way I did re-allocate some money to United SGD and Fullerton Funds when the SGD crossed the 1.25 mark against the USD.

I have noticed that these funds generate better returns when SGD is strengthening. Looking at the returns in past 3 months I am going to re-balance my portfolio and move some money from US Equities to these funds before the “Sell in May, Go away” phenomenon hits the wall street. Till then enjoy the gains 🙂


Gold – Next bubble in making or Next Bubble to Burst?

Practically every day we hear one or the other analyst doling out advice to invest in gold and how at least 10% (though this recommendation can be as high 20%) of your portfolio should comprise of gold or gold stocks.

The Gold price has fluctuated wildly in the past year. After hitting a high of US$1032/oz in March 2008, it fell to US$690 in November 2008 and is back up again at around US$900/oz.


The US Dollar co-relation

First the rally was attributed to weakness in US dollar. The Gold prices moved in inverse tandem with the weakening dollar beginning 2003. US Dollar Index fell from 101.91 in Jan 2003 to 71.34 in Apr 2008 – appx. a 30% weakness. The USD Index measures the performance of the US Dollar against a basket of currencies: EUR, Japanese Yen (JPY), Pound Sterling (GBP), Canadian Dollar (CAD), Swiss Frank (CHF) and Swedish Krona (SEK). The most noted move was the weakening of USD from 1.25 to 1.63 against the Euro during the same time frame – a 30% appreciation of Euro against the USD.


Gold in the mean time marched from US$450/oz to US$1030/oz translating in gains of around 130%


Oil Co-relation

Some traders price Gold between 7.5 to 15 ratio to the Crude Oil. So when Oil touched its peak of US$147 a barrel the gold prices were being predicted to touch $2200 (147×15 = 2205) on an optimistic scale, and the price of US$1100 (147x 7.5 = 1102) looked reasonable. The gold prices did follow the falling crude for some time but the pair seems to have lost co-relation now. With current crude oil prices around US$45/bbl, using the Crude oil to Gold ratio the optimistic Gold price comes at US$675/Oz and pessimistic price comes to US$338/Oz.


The Inflation hedge

Gold has been, more often than not, regarded as a good hedge against inflation. With the skyrocketing prices of commodities during first half of 2008 the inflation across the world had started to move toward the double digit territory. Countries like India and China had inflation of upwards of 12%. With the rising inflation the investment in gold as a hedge was a prime theme then. The inflation has now fallen back to single digit levels in most of the economies and there seems to be real threat of deflation with falling consumption.


Risk Aversion for uncertain times

After having exhausted all the above theories the latest story is that of safe investment in uncertain times. With falling stock prices, lowering treasury yields and the sovereign default risk inching upwards investing in gold seems to be the buzz word again. The reason this time is that Gold is a real tangible asset that has been considered valuable for centuries. The supply of gold is limited thus it makes a perfect investment.


The Contrarian View

Having considered all the reasons of why to invest in gold let us now look at the other side of the coin.


Applying the Dollar co-relation theory the gold price should be headed downwards. The USD index is up at 87 as on date of writing. Using linear equation we can arrive at a fair value of gold in relation to the USD index which is appx. US$775.


Using the Oil co-relation the gold should be trading anywhere between US$338 to US$675 an ounce and with inflation falling sharply people should be selling gold.


Now coming to the risk aversion theory let us answer a simple question – is gold not really a commodity? It has a derived value. Unless the world moves back to the days when people would use gold as currency to buy and sell goods, investing in gold is as good as exposing your money towards the price fluctuations in gold price (unless someone can guarantee that gold will never fall down).


On the demand supply front – the demand has shown elasticity to price. India one of the biggest consumers of Gold reported 90% decline in Gold imports year on year for the month of January 09, when the prices touched all time highs due to increased global price and weakened domestic currency. Since then the currency has weakened further and there are reports of households selling old gold and avoiding new purchases.


Some other interesting facts about gold

1. Except for the last five years, gold has been in a bear market after a peak in 1980.

2. Central banks have tons of bullion which they occasionally threaten to sell. Will they not realize this threat if national debt needs to be repaid? Central Banks have pledged gold in the past to obtain foreign debt.

3. If you don’t count the last five years, gold stocks have not done well.

4. The Gold stock in the world is lesser than silver and more than platinum.



As with any investment it’s easy to get carried away during a bull market is prevailing. When oil was at US$147 the prediction of US$200 a barrel looked true, but then fundamentals kicked in and the demand dropped drastically as consumption slowed.

Same can be the case with gold, with prices around US$900/oz the targets of US$1200 or even 1500/oz look within striking distance. To support the technical analysts who are recommending gold would point out that gold has created a strong foundation around US$900/oz and is ready for the next big move, but looking from the other side you can see that Gold has made multiple attempts to breach US$1000/oz mark but has been unsuccessful thereby creating a resistance.


Also why is gold the only metal being recommended for investment? Silver and Platinum are equally precious and have a wider industrial use. Both the metals have corrected by around 40% from there all time peaks which is definitely more than the correction that gold has underwent (10%).

Lastly do answer these questions before considering to “invest” in gold, you might realize that Gold could be the next bubble to burst.


1. Does Gold grow with time, or generate income or pay interest.

2. Is owning Gold not associated with storage costs, Insurance etc?

3. If you lost your job and had Gold and House as an Investment – which would you sell first?

4. Can gold be eaten?

5. What would happen if the gold funds faced redemption pressure?


Published in Business Times as well – http://www.businesstimes.com.sg/sub/premiumstory/0,4574,327931-1239479940,00.html?