Benefits of investing in international markets

1) Additional returns from rupee depreciation 2) Low correlation between Indian and US markets 3) Opportunity to earn higher returns 4) Opportunity to invest in FAANG companies

How to invest in international equities?

a) Direct stocks: Some Indian platforms allow you to invest directly in US stocks. These platforms have tied up with US stock brokers that facilitate investment in US stocks. However, directly investing in stocks is very risky and also entails high currency conversion (INR to USD) charges. b) Exchange-traded funds (ETFs): Some Indian AMCs offer ETFs that allow you to invest in a basket of US stocks. These baskets may be based on a particular underlying index or theme. However, you don’t have the systematic investment plan (SIP) option with ETFs. c) Fund of Funds (FoFs): Some Indian AMCs offer mutual fund schemes (FoFs) for investing in US stocks. They have a tie-up with a US mutual fund. The money collected by the Indian mutual fund scheme is transferred to the US mutual fund scheme, which further invests it in US stocks. Apart from a lump sum investment, one can also invest in these schemes through the SIP route. You can choose from the top performing international mutual funds based on returns and other parameters.

How long should you stay invested?

Equity investments, whether domestic or international, should always be done for the long term. If you are looking at the short term, equities are very volatile and should be avoided. Your investment horizon should be at least five years if you wish to benefit from the power of compounding since that takes time.

Make international equities a part of your asset allocation

Follow asset allocation for long-term financial goals, such as saving for your child's higher education or your retirement fund. Diversify your investment portfolio into domestic equities, international equities, fixed income, gold, etc. While domestic equities have provided good returns in the long run, international equities provide a hedge against country risk. International equities have a low correlation with Indian equities. Within international equities, US equities can provide you additional returns thanks to rupee depreciation against the US dollar and the opportunity to invest in global companies that are not listed in India. Rather than being a consumer, it is time to be a consumer and investor in your favourite FAANG companies.

Asset allocation: Should you make US and other global equities a part of your investment portfolio?

Q: Latest trends in foreign investment

Better awareness among Indian investors about the benefits of investing in international stock markets Availability of a wider range of investment products (international mutual funds, ETFs, direct stock investment platforms, etc.) The outperformance of the US and some other stock markets compared to Indian stock markets Availability of investment opportunities (such as FAANG companies) that are listed only on the US markets

Date : 24/11/2022
Read: 7 mins

Investing in international companies listed on the US stock markets provides diversification, investment opportunities unavailable in India, good returns, and benefits from rupee depreciation.

Imagine this scenario. You are on vacation in an unfamiliar city. You search for the nearest restaurant using Google. You book an Uber using your iPhone and reach the nearest McDonald’s. You place your order for your favourite burger and coke and pay for the meal using your Visa credit card.  Now, Google, Uber, Apple, McDonald’s, Coke, and Visa are all MNCs listed on the US stock exchanges. We use so many products from foreign companies every day. What if we can invest in these foreign companies? In this article, we will discuss the latest trends in foreign investment and why people are investing more in US markets. Latest trends in foreign investment Till a few years back, asset allocation for Indian investors mostly included domestic equity, fixed income, and gold. However,...

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Asset allocation: Should you make US and other global equities a part of your investment portfolio?