Global Markets: How can you benefit through International Investing?

By: Jay Patel | 19 August, 2020

Have you ever wondered about our dependency and usage of foreign companies and their products/services into our daily life and business? From shopping on Amazon to watching Netflix on Apple gadgets while sipping Coca-Cola, foreign companies have molded into essential part of our daily lives. But have you ever thought you can become an investor along with being a consumer in global brands? Let me explain how an Indian citizen can invest in international companies:

Separate DEMAT and Trading Account

In order to invest in Equities abroad, you need to open a separate DEMAT and Trading account from a recognized and authorized broking house. However, the operational framework remains the same but as per RBI guidelines, Indians are permitted to Invest $250,000 per year (approx. Rs. 1.88 Cr) under the Liberalized Remittance Scheme (LRS). The difference arises in brokerage structure which differs across broking houses.

Exchange-Traded Funds(ETF) Route

If you are not willing to open separate accounts or looking for a cost-efficient way to sail in global equities, you can buy ETFs offered by several fund houses in India. ETF broadly invests in the S&P 500 Index, NASDAQ 100 Index, or Chinese companies. You can invest in such ETFs using your existing DEMAT and trading account or you can contact your broker for the same. ETF’s charge minimal expense ratio and they are quite tax-efficient than mutual funds. ETFs can be traded like stocks, unlike Mutual Funds.

Mutual Funds(MF) Route

They are quite similar to ETF, but mutual funds have the flexibility to invest in different stocks around the globe, while in ETF choice of stocks remain the same. Several mutual funds have exposure to the equity market across USA, Europe, Japan, China along with our Indian companies. Mutual funds have exit load associated along with expense ratio. Mutual funds can only be bought through Authorized MF distributors or through AMC’s. However, they can be held in the DEMAT account but they are not tradeable like stocks or ETF’s.

International Investing should be a part of your portfolio and it shouldn’t be ignored. One of the primary reasons for investing globally is that your risks get diversified and your returns are no longer correlated with domestic market volatility as well as events. Also, investors get an added advantage if the global markets are booming and their currency appreciates which contributes to higher returns.