Fixed Deposits vs. Stocks, what should NRIs invest in?

Industrial development in India has been commendable in the last few years. New businesses are flourishing in India which has attracted many foreign direct investments. Non-Resident Indians are always looking for lucrative opportunities to grow their wealth and the Indian stock market offers many options to expand their portfolio. However, shares and securities are always subject to market risk. Fixed Deposits on the other hand are a more secure and laidback approach to saving money. The market conditions do not affect your investments, however, the rate of interest on Fixed Deposits is way lower than stocks.

So, what should a Non-Resident Indian who’s looking to put some extra funds away invest in? Let’s dive deeper into what stocks and Fixed Deposits have to offer, and you can decide for yourself.

Fixed Deposits

One of the oldest and the most secure way of investing your money is putting them away safely in Fixed Deposits. One has to open a Fixed Deposit with a bank of their choice, deposit a lump sum amount and set a lock-in period for the funds the mature. The deposit gathers interest based on the amount deposited, the tenure and the interest rate offered by the bank.



NRIs can open three types of fixed deposits in India. They can open an NRE Account, an NRO Account or an FCNR Deposit. NRIs who wish to send money back to India from their resident country and save it in INR can opt for NRE Accounts. Many banks offer lucrative interest rates on NRE Accounts and the interest is not taxable in India. NRIs who wish to save income accrued in India can opt for an NRO Account. The interest earned on this kind of account is taxable in India. NRIs who wish to save their foreign currency in India without converting it into INR can opt for an FCNR Deposit.

FDs are immune to market fluctuations and inflation hence they are a more laid-back form of investment. While the risk exposure is limited so are the returns on investment. Fixed Deposits offer good returns in the long run but not so much in the short run. So, while FDs are a safe and slow way of growing your money, investing in stocks is a more aggressive approach with higher risk but also with chances of higher returns as compared to FDs.

Stocks

Stocks are investment instruments where a unit represents a percentage of a company. Many up-and-coming businesses and companies in India list themselves on the stock exchange to raise money to carry out and expand their operations. This also helps shareholders to earn returns based on the companies’ performance. Stocks are market-linked investment options; hence, they are very sensitive to market volatility. Returns are unstable and greatly depend on market conditions. If the market performs well, the returns could be high but if the market doesn’t perform well, shareholders could also face a loss. Despite the risk factor, many NRIs have been investing in shares and securities in India due to the possibility of high returns.


If an NRI is interested in investing in the Indian stock market they need to either have an NRE Account an NRO Account or a trading account. NRIs can also choose to directly invest in Portfolio Investment Scheme buy and selling shares and debentures of Indian companies from any part of the world.

SBM Bank India offers both Fixed Deposits and a PIS (Portfolio Investment Scheme) Account to NRIs. The bank offers attractive interest rates on NRE and NRO Deposits. They also provide NRIs with a way to reap the benefits of the Indian stock market through their PIS Account.

Fixed Deposits and stocks both have their share of pros and cons, which makes them both lucrative investment schemes. While FDs are a secure way of investing with small but stable returns, stocks are a more aggressive investment instrument with chances of higher returns. One must do their research and then decide based on what to invest in based on their overall financial goals.


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