Latest PPF Rules: Can an NRI continue investing in the Public Provident Fund account opened when he was an Indian resident?

If your child opened a PPF account in India as a resident and later became an NRI, he or she can hold the account till maturity. Contributions and interest accrual are allowed till the end of the 15-year term, but the account must be closed on maturity and cannot be extended. It is important to note that while NRIs can hold their PPF accounts, they must do so under non-repatriation conditions. This means that the funds cannot be transferred abroad or converted into foreign currency. It is essential to inform the bank about the change in residency status to comply with regulations and continue the contribution till maturity.

I have been investing in mutual funds For 14 years, I have observed that funds that have performed well initially, such as Axis Bluechip and Aditya Birla Sun Life Frontline Equity, both large-cap funds, have failed to maintain consistency. Advisors often suggest investing through SIPs and maintaining a simple portfolio with fewer funds. However, some funds that were five-star in 2010 now have only one star. My investments have grown, but I am not sure whether I should bail out these underperforming funds and reinvest them in better-rated ones as these could attract capital gains tax.

Prableen Bajpai, Founder, FinFix Research and Analytics: When evaluating mutual fund performance, don’t rely too much on star ratings. These ratings reflect past performance and do not guarantee future success. A fund’s rating can drop from five to one star often due to emphasis on past returns. However, a lower rating does not automatically make a fund bad or justify an exit. It is critical to understand the reasons for poor performance or rating drop and regularly review your schemes. Compare the fund’s performance with its benchmark and peers, focusing on ongoing returns, rather than past returns. If your fund has performed well overall and aligns with your objectives, there is no need to redeem it and reinvest based solely on a rating change. You can stop SIPs in underperforming funds without looking for new schemes for higher ratings. Keep your portfolio manageable to avoid over-diversification and to make it easier to track performance. Consider building a balanced portfolio with active and passive funds, and use rolling returns for more accurate performance analysis.

I have been investing in mutual fund SIPs for a few years now, with 15% allocation in debt funds, 5% in a US ETF, 60% in large-cap stocks, 10% in flexi-cap stocks and 10% in small-cap stocks. However, I have not invested in fixed deposits, PPF or real estate. How can I diversify my portfolio by asset class? What are the guidelines or rules of thumb for this?

Rules of thumb can be misleading as your needs can change drastically at any time. Ideally, you should diversify across all major asset classes – equity, debt, gold and real estate. Equity exposure should range between 30% and 70% depending on your risk profile. Flexi-cap funds are recommended for better diversification, while 10-15% of your portfolio can be allocated to international markets, marked within your overall equity exposure. For debt, consider investing in the PPF (up to Rs 1.5 lakh a year) if you do not need liquidity for 15 years, along with a mix of debt mutual funds and arbitrage funds. Allocate 10-15% to gold through gold mutual funds or ETFs. The problem with real estate is that it usually involves large amounts. Also, choosing the right property at a fair price can be a challenge. If you want to invest in real estate, you should make sure that it does not exceed 25% of your overall assets, to avoid liquidity problems and the maintenance issues that come with them.

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