{"id":184996,"date":"2023-09-18T09:41:35","date_gmt":"2023-09-18T09:41:35","guid":{"rendered":"https:\/\/indiansapidnews.com\/?p=184996"},"modified":"2023-09-18T09:41:35","modified_gmt":"2023-09-18T09:41:35","slug":"falling-rupee-how-to-plan-ahead","status":"publish","type":"post","link":"https:\/\/indiansapidnews.com\/celebrity\/falling-rupee-how-to-plan-ahead\/","title":{"rendered":"Falling Rupee: How To Plan Ahead"},"content":{"rendered":"<p><strong>The impact of currency depreciation can be mitigated by holding a portion of your investment portfolio in dollar-denominated assets.<\/strong><\/p>\n<p>Over the past year, the rupee has depreciated 3.07 per cent while over three years it has declined at an annualised rate of 4.18 per cent against the US dollar.<\/p>\n<ul>\n<li><strong>QUESTIONS ABOUT MONEY? ASK rediffGURUS!<\/strong><\/li>\n<\/ul>\n<p><strong>Driven by trade deficit<\/strong><\/p>\n<p>The massive demand for the US dollar is a key reason for the rupee&#8217;s weakness.<\/p>\n<p>&#8220;India requires huge amounts of imports on a continuous basis. Our exports, by comparison, are small. Hence, our trade position doesn&#8217;t support a strong rupee,&#8221; says Joseph Thomas, head of research, Emkay Wealth Management.<\/p>\n<p>Interest rate differential also plays a part.<\/p>\n<p>&#8220;During times when interest rates in the US rise rapidly within a short period, capital flows out of India as foreign portfolio investors prefer to invest in the US, instead of emerging markets, debt,&#8221; says Abhishek Kumar, a Securities and Exchange Board of India or Sebi-registered investment advisor and founder, SahajMoney.<\/p>\n<p><strong>Goals that get impacted<\/strong><\/p>\n<p>A number of parents want to send their children abroad for graduate and post-graduate education.<\/p>\n<p>International travel is also high on the priority list of many Indians.<\/p>\n<p>Some parents also want to support their child, who has moved to the US, in purchasing a house.<\/p>\n<p>&#8220;Non-resident Indians, who have invested the bulk of their money in India, but propose to stay abroad after retirement, would also bear the brunt of a sharp depreciation,&#8221; says Deepesh Raghaw, a Sebi RIA.<\/p>\n<p><strong>Plan for depreciation<\/strong><\/p>\n<p>If you have dollar-denominated goals, you need to factor currency depreciation into your financial planning.<\/p>\n<p>&#8220;Suppose you plan to send your child to the US for higher education where education inflation is, say, 5 per cent. And you wish to factor in a 4 per cent annual currency depreciation rate.<\/p>\n<p>&#8220;So, plan for a 9 per cent increase each year in the value of this goal,&#8221; says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors.<\/p>\n<p>Investors who have not done such planning will have to defer their goal, alter its frequency, or divert money saved for other goals.<\/p>\n<p>In the case of child&#8217;s education, which can&#8217;t be deferred, the only option is to divert money from another goal.<\/p>\n<p>In the case of travel, you can go every, say, three years instead of two.<\/p>\n<p>Alternatively, you could opt for a less expensive destination or one where the currency impact is less pronounced.<\/p>\n<p>The impact of currency depreciation can also be mitigated by holding a portion of your investment portfolio in dollar-denominated assets.<\/p>\n<p><strong>Invest in international funds<\/strong><\/p>\n<p>When you invest in an international fund-of-fund, your rupee investment gets converted to dollar.<\/p>\n<p>The dollar amount is used to buy units of the parent fund. When you sell, those units get sold.<\/p>\n<p>The dollar amount obtained is converted into rupee. Because of the rupee&#8217;s depreciation, the amount you obtain is higher.<\/p>\n<p>Investors can also take the Liberalised Remittance Scheme (LRS) route and remit &#36;250,000 abroad annually.<\/p>\n<p>This route opens up a massive number of international equity and debt exchange-traded and index funds, active funds, and stocks, but tax compliance becomes more onerous.<\/p>\n<p>&#8220;When investing in international equities, have at least a 7 to 10-year horizon. If valuations in the US market are high, take the systematic investment plan route,&#8221; says Dhawan.<\/p>\n<p>Don&#8217;t allow recency bias to affect you. It is impossible to predict whether Indian or US equities will outperform in the future.<\/p>\n<p>&#8220;If 20 per cent of the money you require will be for international goals, then have 20 per cent of your portfolio in international assets,&#8221; says Dhawan.<\/p>\n<p><strong>Take exposure to yellow metal<\/strong><\/p>\n<p>Gold is priced in US dollars in the international market.<\/p>\n<p>&#8220;Its Indian price is a function of its international price and exchange rate (plus import duty). When the rupee depreciates against the US dollar, the currency hedging happens automatically,&#8221; says Kumar.<\/p>\n<p>Gold is a speculative asset. &#8220;It doesn&#8217;t generate cash flows. Its price is purely a function of demand and supply,&#8221; says Raghaw.<\/p>\n<p>It can also be quite volatile. Kumar suggests allocating 5 to 10 per cent of your portfolio to gold.<\/p>\n<p>Invest with a long-term horizon as the yellow metal can underperform for long periods.<\/p>\n<p><img decoding=\"async\" class=\"aligncenter\" src=\"\/\/im.rediff.com\/getahead\/2023\/sep\/18child-education2.jpg?w=670&#038;h=900\"><\/p>\n<ul>\n<li><strong>QUESTIONS ABOUT MONEY? ASK rediffGURUS!<\/strong><\/li>\n<\/ul>\n<p><strong><em>Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities\/schemes or any other financial products\/investment products mentioned in this article to influence the opinion or behaviour of the investors\/recipients.<\/em><\/strong><\/p>\n<p><strong><em>Any use of the information\/any investment and investment related decisions of the investors\/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.<\/em><\/strong><\/p>\n<ul>\n<li><strong>MONEY TIPS<\/strong><\/li>\n<\/ul>\n<p><strong>Feature Presentation: Ashish Narsale\/<em>Rediff.com<\/em><\/strong><\/p>\n<p>Source: <a href=\"https:\/\/www.rediff.com\/getahead\/report\/falling-rupee-how-to-plan-ahead\/20230918.htm\" target=\"_blank\" rel=\"noopener\">Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The impact of currency depreciation can be mitigated by holding a portion of your investment portfolio in dollar-denominated assets. Over the past year, the rupee has depreciated 3.07 per cent while over three years it has declined at an annualised&#8230;<\/p>\n","protected":false},"author":2,"featured_media":184995,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Falling Rupee: How To Plan Ahead - Indiansapidnews.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/indiansapidnews.com\/celebrity\/falling-rupee-how-to-plan-ahead\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Falling Rupee: How To Plan Ahead - Indiansapidnews.com\" \/>\n<meta property=\"og:description\" content=\"The impact of currency depreciation can be mitigated by holding a portion of your investment portfolio in dollar-denominated assets. 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