Newbie implementing PP in India

[mukramesh]

@LC475: I understand what you are saying regarding Gold's 'world price' not necessarily being affected, however your Zimbabwe scenario showed that even a Zimbabwe-PP would have done somewhat better than any other Zimbabwe-only investment strategies due to holding gold. I'll have to think about what that actually means for non-US residents, though, because they would be exposing themselves to quite a bit of currency risk by creating a US PP. It is not clear to me which option is better: Local PP or US-PP with currency risk.

[LC475]

It is not clear to me which option is better: Local PP or US-PP with currency risk.

I think it depends on your time horizon.  If you are thinking in a long term way, fifteen years or more, then a US-PP should better help you.  If your horizon is five years or less, the likely currency swings make a local PP a more proper choice.

[krod16]

Looks like Craig had already mentioned about this,

https://web.archive.org/web/20160324133 ... -in-india/

It would be interesting to know his views on this analysis.

[LC475]

It would be interesting to know his views on this analysis.

Safe to say he disagrees with me. 

As would many.

I'm just telling you the way I see it.

Also, I do not necessarily really see the advantage of holding Indian assets when you are not even living in India, but Norway.  Unless you think India is in for tremendous growth in the future.  Which, it probably is, based on long-term trajectory.  It will probably be a "first-world" country in 20 or 30 years, and to get there will require tremendous growth.  So what do I know?

[krod16]

Actually I meant his views on the original analysis by Pattu 

I am living temporarily in Norway and will be returning back to India. So it makes sense to me to invest in India. Yes, India is poised for tremendous growth in the coming years.

Also I think it's a lot expensive for us Indians to have US based investments considering we will be heavily taxed for it. For example , LTCG on Indian equity investments is zero but taxed for US equity investments not to mention the broker charges.

[MediumTex]

Actually I meant his views on the original analysis by Pattu 

I am living temporarily in Norway and will be returning back to India. So it makes sense to me to invest in India. Yes, India is poised for tremendous growth in the coming years.

Also I think it's a lot expensive for us Indians to have US based investments considering we will be heavily taxed for it. For example , LTCG on Indian equity investments is zero but taxed for US equity investments not to mention the broker charges.

A couple of questions:

1. Which long term bonds are you using?  I'm sure you said earlier in the thread, but I didn't read the whole thing.  I don't see how a country with 12% inflation could afford to issue long term bonds, especially ones that weren't callable.

2. What is your objection to just setting up a US PP?  You say the U.S. funds would be taxed heavily, but wouldn't that just be upon sale, and the PP doesn't involve a lot of sales (perhaps one sale a year from one or two of the PP assets).

3. My understanding is that there is a lot of corruption in India.  Do you have faith that its public equity markets reflect the real value of Indian companies?  What kind of auditing is required to be listed on a public exchange in India?  Stock markets in developing countries are often very speculative (i.e., risky) for a variety of reasons, and corruption is a big one.

[krod16]

Actually I meant his views on the original analysis by Pattu 

I am living temporarily in Norway and will be returning back to India. So it makes sense to me to invest in India. Yes, India is poised for tremendous growth in the coming years.

Also I think it's a lot expensive for us Indians to have US based investments considering we will be heavily taxed for it. For example , LTCG on Indian equity investments is zero but taxed for US equity investments not to mention the broker charges.

A couple of questions:

1. Which long term bonds are you using?  I'm sure you said earlier in the thread, but I didn't read the whole thing.  I don't see how a country with 12% inflation could afford to issue long term bonds, especially ones that weren't callable.

2. What is your objection to just setting up a US PP?  You say the U.S. funds would be taxed heavily, but wouldn't that just be upon sale, and the PP doesn't involve a lot of sales (perhaps one sale a year from one or two of the PP assets).

3. My understanding is that there is a lot of corruption in India.  Do you have faith that its public equity markets reflect the real value of Indian companies?  What kind of auditing is required to be listed on a public exchange in India?  Stock markets in developing countries are often very speculative (i.e., risky) for a variety of reasons, and corruption is a big one.

1. I am using a long term debt fund for the bonds. So it contains a mix. Bu we do have 30 year bonds as well.
http://www.bseindia.com/markets/debt/se ... C&crpage=4

2. Setting up a brokerage account, brokerage charges and taxes at sale as well as taxes for holding foreign assets (complications). I think US taxes also need to be paid.

3. While there is corruption here, I think we have a good regulatory authority for the stock exchanges that can be trusted. We do have good large cap companies like L&T, Tata, etc that are trustworthy.
http://www.bseindia.com/markets/equity/ ... pandable=6

[LC475]

Actually I meant his views on the original analysis by Pattu 

I am living temporarily in Norway and will be returning back to India. So it makes sense to me to invest in India. Yes, India is poised for tremendous growth in the coming years.

Yes, that does make sense.  Apologies for questioning you.

Look, I feel bad casting doubt on your plan at all.  I feel like in general we should be here encouraging you to stick with your plan (stay the course!), not encouraging you to bail out and try something different.  Honestly, you will probably be fine with what you're doing, if you just stick with it.  It might not be ideal, but what on this side of the Garden of Eden is?

All that said, I personally like the idea of having a US PP, from a theoretical perspective at least.  So in response to you good points:

Also I think it's a lot expensive for us Indians to have US based investments considering we will be heavily taxed for it. For example , LTCG on Indian equity investments is zero but taxed for US equity investments not to mention the broker charges.

I take it you mean that India taxes you for foreign equities held at an Indian broker, is that right?

Maybe you could check out opening an account at a US broker instead, say, Charles Schwab.

http://international.schwab.com/public/ ... _investing
http://international.schwab.com/public/ ... ments.html

I know people from India, one is even a CPA, so I could maybe ask them what they think would be an easy low-cost low-tax way to invest in US stocks and bonds for an Indian citizen, if you are very interested in that.

Otherwise: stick with your plan and all the best!

[krod16]

Thanks. I guess Harry Browne and Craig would be of the opinion that PP should work in any progressive economy.

Financially wise people in India seem to back the stock/bond asset allocation. And that is with actively managed mutual funds because they have been beating the index for a few years and are supposed to continue for many years to come.

Personally I would like to stick with simplicity. And right now I see that in owning Indian assets. From a tax perspective as well as managing those. If I go for US assets, I'm going to need assistance from a financial consultant regarding the taxation as it's a lot more complicated holding foreign assets in India.

Thanks for those links. I will check them out.

You can ask the person you know from India and I think he will agree with me that it's much easier and simpler to manage this in India.

[krod16]

Update for June 2015.

[krod16]

Snapshot for July 2015. I added the PF + Emergency cash to the cash component of the PP so it caused an imbalance. And it's going to be a bit tedious to update the values for the cash now.