Global investments
A smart investment strategy requires choosing a good mix of various asset classes, which can match up to individual financial goals. Equally important are an investor’s risk profile and the time horizon for which he/she wants to stay invested. Any financial advisor would recommend investors ensure diversification through asset allocation. This is because investment in a wide range of asset classes ensures portfolio diversification and also offers a healthy risk-reward balance.
Every Indian investor must design his/her portfolio by considering these factors and also look at international investment to broaden the investment horizon. So why does international investment matter?
Let’s find out! Here is everything that an investor needs to know about international investing.
International investments for Indian investors refer to the practice of investing in assets or securities outside of India’s borders. It allows investors to diversify their portfolios by gaining exposure to global markets, industries, and economies. International investments can include stocks, bonds, mutual funds, exchange-traded funds (ETFs), real estate, or other financial instruments. They offer the potential for capital appreciation, access to new investment opportunities, and exposure to different currencies.
It is important to note that they also come with risks such as currency fluctuations, geopolitical factors, and varying regulatory frameworks. Indian investors can engage in international investments through various channels, including offshore funds, global mutual funds, or direct investments.
Here we have listed down some of the top reasons for Indian investors to consider international investment:
Here are two major ways in which Indian investors can invest in the foreign markets:
Who hasn’t heard of the acronym FAANG which stands for Facebook, Amazon, Apple, Netflix, and Alphabet(Google)? However, these companies are not Indian and are therefore not listed on Indian stock exchanges. This restricts the direct access of Indian investors to these stocks.
India has many established brokerage houses that have tie-ups with various foreign brokerage houses. The idea is to allow investors across borders to easily invest in other country’s listed companies. There are also brokerage houses in foreign countries that let Indian investors to set-up an account directly with them and trade in securities listed on other stock exchanges. You could also try brokerages in India that allow investing in foreign securities.
Investors who are looking to access foreign stocks can also invest in Indian exchange-traded funds or mutual funds which primarily invest in foreign securities. International mutual funds/ETFs pool money from various investors and invest the same in global equities. This is done after thorough research about the companies, study of exchange rate risks, and expected market outlook of the selected companies.
This can be an easier and better way to get exposure to global equities as compared to direct investment through brokers. It also comes with lesser transaction costs as compared to individual stock investment through a broker. Mutual funds also offer professional expertise that comes from the fund manager’s experience. Also, in mutual funds, investors do not have to invest sizable sums and are especially beneficial for new investors.
With the Fisdom app, investors can now easily make investments in international mutual funds from their smartphones. The app allows investors to select funds based on their preference of time-horizon and nature of securities such as debt, equity, etc.
International investment generally fetches income in the form of dividends, interest, capital gain upon asset liquidation, etc. These are taxable as per the normal tax provisions in the country. When it comes to taxation, international mutual fund investments are treated the same way as debt mutual funds. Here are the applicable tax treatments:
Here are the advantages of international investments for retail Indian investors, summarized in bullet points:
Remember, before making any international investments, it’s important to conduct thorough research, understand the associated risks, and consult with a financial advisor to ensure alignment with your investment goals and risk tolerance.
To sum up, global investment offers investors the opportunity to be a part of the growth story of large international corporations that are renowned across the world. It also provides diversification to an investor’s portfolio. Investors must always take small steps in international investment and aim to get a better understanding of how these function.
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