Why this Luxembourg-based couple invests only in Indian stocks

The price of luxury and lifestyle

For Prateek and Neha, a luxury car like their Mercedes Benz A-Class, which costs 43,000 euros, is a feasible purchase in Luxembourg, far from the high prices ₹55 lakh price for a similar model in Bengaluru.

“I would not easily buy a luxury car in India with a higher price tag ₹“The price is 50 lakh,” says Prateek, a senior analyst at Amazon. “But these German luxury cars are priced much lower here in Luxembourg and are easily affordable compared to my Euro income.”

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The price of the car, at 43,000 euros, adjusted to purchasing power parity (PPP), is equivalent to about ₹10.3 lakh, while the same model costs around ₹55 lakh in Bengaluru. PPP compares the cost of goods across countries and, according to the OECD, equalizes purchasing power by taking into account differences in price levels.

“For the same reason, holidays in Europe are also affordable, as we spend in the same currency we earn. Of course, the proximity between the different countries also makes it cheaper, as we can travel by car,” Prateek said.

Prateek and Neha, who now works as a financial manager for a German real estate company, moved to Luxembourg in search of a better quality of life. Neha had previously worked for one of India’s Big Four companies.

“If we stayed in India or moved to the US, we would have had more job and income opportunities, but we wanted to experience the superior quality of life that Europe offers,” Prateek explains. “Working-class Indians don’t come to Europe in search of more money. We can easily earn 1.5 to 2 times more by moving to the US or Dubai. Needless to say, the net savings would also be higher.”

This choice also means that career growth and income progression are relatively slower compared to their peers in India or the US. For example, annual salary assessments in Luxembourg are typically 1-2%. Over the four years they have lived in Luxembourg, this modest rate has created a noticeable gap between their salaries and those of their counterparts in India and the US.

“The valuations are low because there is no inflation. Also, unlike in India, it is not possible to change jobs every two years to get 20 to 50 percent raises,” Neha said.

But do they feel abandoned? Not for a moment, say Prateek and Neha.

In fact, the couple welcomes the slower pace of life in Luxembourg, which allows them to focus on their health and hobbies.

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“The country’s employment laws offer residents a good work-life balance, probably one of the best in Europe,” Neha adds. “We go to the gym regularly, do other physical activities, travel more thanks to generous paid holidays and have time for ourselves, something that would be difficult in India.”

Higher living expenses

The higher quality of life in Luxembourg comes at the cost of a slightly higher cost of living. The couple is careful not to compare the standard of living between India and Luxembourg by simply converting currencies.

“We compare in percentage terms. For example, we pay around 30% of our income on rent. In Bengaluru, renting a similar house would not require more than 15% of our salaries,” Prateek said.

According to Numbeo, an online database on quality of life metrics, the cost of living, including rent, in Luxembourg is about 230% higher than in Bangalore. To maintain the same standard of living, one would need approximately €3,564 (about €1,000). ₹3.33 lakh) in Luxembourg compared to ₹1 lakh in Bangalore. This estimate closely matches the World Bank’s PPP data, which suggests that a salary of ₹A salary of 87,000 euros in India offers a similar quality of life to a salary of 3,564 euros in Luxembourg.

Neha points out that the standard of living in Luxembourg is relatively higher than in other European countries with similar job opportunities, such as Germany and France. However, the difference in salaries is not substantial.

“Luxembourg is like the Bombay of Europe. You pay more for rent, food and other living expenses, but salaries are only slightly higher than in, say, Gurgaon or Bengaluru,” he says.

One area where the couple has cut back is on dining out, due to high costs.

“Being a small country, there are fewer options and the price range is limited. We have to spend at least 15 Euros (approximately 10 Euros) on a trip. ₹1,400) per person, while in Bengaluru, good options start from as low as ₹200. Even big cities in Europe, such as Paris or London, offer more variety at different price ranges, starting from 7-8 euros,” says Prateek.

As is common in many Western countries, labor-intensive services such as maintenance, cleaning and cooking are relatively expensive, so the couple undertakes these tasks themselves.

“A simple men’s haircut costs between 35 and 40 euros, but since it is a necessity, we have no choice but to pay,” Prateek adds.

“I finally worked up the courage to indulge in a haircut for the first time after two years of living here,” Neha laughs.

Lower taxes, free transportation and healthcare

Despite the higher cost of living in Luxembourg, Prateek and Neha have not seen a drop in their savings rate since moving from India. While they face higher rent, food and lifestyle expenses, these costs are offset by savings on free public transport and subsidies. health care.

“We are required to contribute 3% of our individual income to government-sponsored health insurance. At a cost of just 3%, medical care is completely free for us, except for dental care,” Neha explains.

In addition, the couple must contribute 2% of their respective income to the unemployment fund. “Under this scheme, if someone gets laid off, the government pays 80% of the last salary earned for two years or until they find another job,” says Neha. “Think of it this way: with 5% of my annual income, I am covered for two major emergencies – medical and job loss. We don’t have to create a separate emergency fund,” she adds.

It is important to note that the 2% and 3% contributions to the unemployment fund and health insurance, respectively, are included in the employees’ annual cost to the company (CTC) and are not deducted from their after-tax cash salary.

Basically, the couple saves on travel expenses, medical care, and the need to accumulate additional funds for emergencies.

When it comes to taxes, the couple pays around 28% of their income, which is 2-3% less than what they would pay in India. However, Neha points out that this is not a burden for them as state-sponsored services and infrastructure provide a comfortable lifestyle. “We don’t have children yet, but another big benefit is free public schools. It’s a huge benefit you get in return for the taxes you pay,” she says.

There are no uniform income tax brackets in Luxembourg; tax rates vary depending on whether you are single, married or married with children. “The tax rate for a couple with two children is the lowest of all categories,” says Neha.

Luxembourg is also one of the few countries with zero capital gains tax. “When we move out of here, I will liquidate part of my ESOP (Single-Option Stock Plans) “To save taxes,” says Prateek.

Investing in Indian Stocks

The couple invests 20-25% of their monthly income, focusing entirely on India. Around 70% goes into direct equities, 20% into mutual funds and the remaining 10% is spread across provident funds, the National Pension System, gold bonds and digital gold.

For stock selection, they take a do-it-yourself approach. “We do our own research to pick stocks and mutual funds. I primarily look at industries that have potential in the future, such as renewable energy, electric vehicles and associated industries, specialty chemicals, etc.,” explains Prateek.

Prateek says they focus on the Indian stock market because they understand it better. “In the US, we only know about blue-chip companies. But beyond that, since we don’t follow the economy or stock markets closely, we can’t pick value stocks. We believe that the Indian stock market offers better investment opportunities at present,” he says.

The couple’s primary investment goal is wealth creation. “We have a stock-focused portfolio as we can take more risks as we age. We want to save enough to achieve financial independence so that we can take more risks in our careers and possibly start our own business,” says Prateek.

They use a Portfolio Investment Scheme (PIS) account to invest in the Indian stock market and use a money transfer platform that offers mid-range exchange rates to send money to India.

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“We use Wise because the exchange rate is much better than that of the banks. Wise charges a fixed fee of €1.11 and 0.61% of the total amount for each transfer. This is less than 1% of the transaction amount,” Prateek explains.

Future plans

When asked if they plan to settle in Luxembourg, the couple is clear: “We will return to India or a nearby country, such as Dubai or Singapore. We want to be close to family,” says Neha.

For this reason, the couple has decided not to buy a house in Luxembourg.

“Mortgage loan “Three years ago, interest rates here were around 1%, but we still decided not to buy because we have no intention of settling here and we will not buy property for investment,” says Neha. “Even in India, we would buy a house just for our own consumption.”