International mix in the NPS asset allocation

[nicholasuk40]

The current design of NPS is missing a critical component of diversification namely international stocks. I think Indian investors could benefit immensely from having Vanguard Total World Stock Index Fund (VT https://finance.yahoo.com/quote/VT?p=VT) as one of the investment options from NPS. Anyone who follows the USD INR rate knows that INR gradually loses value, so any dollar investment in INR terms will increase naturally because of Rupee depreciation. And if you add the appreciation of international assets, then it becomes a double benefit ( stock price increase + rupee depreciation).

You can read more about the international stock allocation here:

https://www.investopedia.com/terms/i/international-portfolio.asp

Given our govt is run by lazy babus and folks with communist mindset, it is highly unlikely we will get this option in NPS. I just want to post this topic here for awareness and to hear your thoughts.

I am currently going with the next best option available: https://www.motilaloswal.com/markets/mutual-funds-market-overview/41518/motilal-oswal-s&p-500-index-fund-(g))

You could buy VT probably via brokerages but it is nice to have it as part of a tax shelter like NPS.

What do you guys think?

 

[switchblade]

@nicholasuk40 The government will never allow international exposure to NPS pension funds. In fact, it actively discourages people to invest in foreign securities, just like they did recently by changing the tax structure on foreign equities to the marginal rate from previously LTCG. If you wish to invest in foreign equities then remember, you will be paying the marginal tax rate!

 

[nicholasuk40]

@switchblade I did not realize there was a change in tax structure. I think even with change in tax structure, there is lot of value in having international exposure as Rupee has been depreciating gradually since our independence.

 

[switchblade]

@nicholasuk40 5% YOY is the rate of rupee depreciation vis a vis USD since 1991

 

[nicholasuk40]

@switchblade Wow, that is a lot !

 

[mariachristi]

@switchblade They also put a 20% TCS on transferring money to a foreign broker. Not to mention the fact that RBI is clamping down on easy ways to send money to foreign trading accounts like the SBM ban on LRS

 

[nicholasuk40]

@mariachristi That sounds like RBI. It is run by communists who don't know how to promote FDI or competition. Britishers left in 1947, but the babus still design rules as if they are going to come back and rule our country.

 

[suntan]

@nicholasuk40 This is very true, and INR will continue going down against USD. Someone saving in dollar will simply have the edge over INR even with zero returns. The government and banks also know this, which is why FCNR interest rates are at 5 % and totally tax exempted.

 

[rls]

@suntan Plessis explain

 

[suntan]

@rls A FCNR is something only NRIs can create in an Indian bank, The idea is , you can have USD in this account and indian banks will pay you interest like FD and this FD is totally tax free irrespective of the amount. RBI and banks feel USD will go up in the coming days so they are giving high interest rates for FCNR accounts.

 

[nicholasuk40]

@rls explain what?

 

[tonedr]

@nicholasuk40 Never gonna happen...I think Navi had plans to launch an FoF based on VT/VWRL. Right now the best domestic domiciled option is Navi's Total US Stocks FoF based on VTI.

 

[nicholasuk40]

@tonedr

Navi's Total US Stocks FoF based on VTI

That is actually news to me. With fund size of ₹ 629.14 Crores, I am guessing lot of Indian institutional investors are already investing in the VTI based fund. It would be a wonderful thing if Navi launches a FoF for VT or VWRL.

Given our right wing govt and communist babus, there is some risk of US sanctions so VT might have some risk but VWRL is slightly more expensive and has no small cap stocks.

https://backpackfinance.com/vt-vs-vwrl-which-etf-is-better/