I am a US resident with Indian nationality. To calculate annual real gain on my investment in mutual funds in India, I am following below mentioned formula:

Annual Real Gain = Annualized Return - Expense - Annualized inflation [CPI] - INR [Indian Rupee] devaluation

For example - One of the Indian ETFs provided me 10.63% annualized return over last 10 years. The fund has expense cost of 0.07%. I am considering avg. annual inflation rate as 6.77%. Annual devaluation rate is 1.04%. Therefore, my annual real gains are: 10.63 - 0.07 - 6.77 - 1.04 = 2.75%

Please let me know if my understanding is correct.

I am planning on moving back to India at some point. If yes, is it better to invest money in US than that in India to avoid currency devaluation and large inflation [compared to US] ?

Thanks in advance.

  • Some questions: #1 Is 6.77% the Indian inflation rate? #2 Given that you're a US resident, when do you expect to return to India? #3 What results would you have received from an Indian Fund? #4 Since you've been in the US for 10 years, why do you care about Indian inflation?
    – RonJohn
    Aug 26, 2019 at 2:59
  • Thank you RonJohn. 6.77 is annualized Indian inflation rate for last 10 yrs. Above mentioned ETF returns are from India and not from US. I have invested my money in Indian MFs. I apologize, if my question is confusing.
    – AkshayP
    Aug 26, 2019 at 3:08
  • "Please let me know if my understanding is correct." That seems correct, for money kept in India for use in India.
    – RonJohn
    Aug 26, 2019 at 5:12
  • 2
    You cannot add percentage points, instead you must multiply percentages. This gives roughly 2% rather than 2.75%. For example, 10% returns and 5% expenses aren't a 5% real gain but just a (1 + 0.1)×(1 - 0.05) = 0.045 = 4.5% real gain.
    – amon
    Aug 26, 2019 at 9:07
  • 1
    how will you ever bring money back from India if needed money.stackexchange.com/questions/112963
    – Neil
    Aug 26, 2019 at 13:41

2 Answers 2


Inflation in India is of no consequence to you. As you are looking to keep the funds ultimately in US you should calculate the returns in USD. I.e. value of USD investment at investment exchange rate and gain in investment converted into USD at the prevailing rate.

Fund expenses are factored in returns. There is no separate expenses.

Edit: It is advisable to save in currency of retirement. It removes the currency exchange risk.

  • Thanks for the answer. As I am not planning to stay in US for long time, I will be using my retirement money in India. In that case, Should I keep investing in India ?
    – AkshayP
    Aug 26, 2019 at 3:00
  • 1
    OP is considering to invest in india and you say "Inflation in India is of no consequence to you"............Am not sure how "no consequence" follows here .
    – RaGa__M
    Aug 28, 2019 at 11:26
  • @Explorer_N If OP invests USD 100 eq in India and gets back USD 110... The inflation in India is of no consequence to find real rate of return. Inflation is relevant if OP is in India to understand real rate of return.
    – Dheer
    Aug 29, 2019 at 1:23
  • 1
    " invests USD 100 eq in India and gets back USD 110" not how reality works: down-vote.
    – RaGa__M
    Aug 29, 2019 at 9:16
  • 1
    @Explorer_N If you believe inflation in India should be used to find real rate of returns in US, you are mistaken. Exchange rates matter, they reflect variety of things including inflation.
    – Dheer
    Aug 30, 2019 at 1:17

Answer to your 2nd question.

Few people notice the opportunity cost of emerging economy compare to any industrial country (USA, EU, Japan, China, ). Besides inflation, you should calculate the opportunity cost if you invest equal similar index ETF of any industrial country. For example, US S&P 500 index past 10 years gains is average ~ 10.27% per annum. While the rupees to dollars fells from 46:1 to 68:1 (47% different). After account for the exchange rates loses, you will a big income loses.

Industrial country

  1. USA is still the world biggest research and development spending country.
  2. The leading R&D position means the world still depends on a lot of core technologies
  3. USA is still the world biggest consumption country
  4. Bigger capital
  5. There are stronger regulation and option to distribute the capital market risk
  6. An equal percentage gain on US index is proportional to the counterpart currency exchange.

Emerging economy

  1. Small capital company involved in export will show better growth
  2. It is easier to manipulate on cheaper equity and properties.
  3. A country like India has a potential huge internal consumption market
  4. Financial and many industries are controlled by oligarch which allow them to rent seek on the internal economy.
  5. Like many emerging economy, India National Pension fund that collect tons of money might subject to abuse to use to manipulate the market, e.g. something similar to Japan Price keeping Opearation in the past.

R&D is a crucial factor to ensure a country sustainable growth momentum. But it is possible if the country has policies to ensure the country to encourage companies to do it, produce enough educated people and enact a large employment market. Take South Korea as an example, although R&D spending is one of the world highest spender, the overall Chaebol structure limit its industry diversity and creativity. I.e. most of the South Korea core production component must import from Japan.

You can either diversify your investment to two countries stock or bet the USA market in the long run.

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