Want to build a global portfolio? Here’s how to invest in foreign stocks

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To reduce the risk associated with stocks, it is very important to diversify by investing in multiple stocks instead of investing in a single stock.

Investments in equities are considered risky, but produce a higher return than long-term fixed return instruments. To reduce the risk, it is very important to diversify by investing in multiple stocks instead of investing in a single stock.

Besides diversification through investments in domestic equities, investing in foreign equities would bring greater stability to a portfolio through geographic diversification.

Why invest internationally?

“When you invest in stocks, you are investing your money in companies that are publicly traded directly or through mutual funds. Likewise, there are many attractive and competitive companies around the world that offer business and growth prospects for your investment. It could be a very good brand or a company that is not available in India. They are large global companies, extremely profitable, scalable and they have global operations as an opportunity to offer an investor. We’ve all heard of the popular term: FAANG (these are tech giants: Facebook, Amazon, Apple, Netflix, and Google) as well as other fast growing companies Microsoft, Nvidia, Shopify, Tesla, Tencent, Ping. An and many other well-known companies. . These are all companies that an investor would like to invest in but didn’t know how to do it, ”said Santosh Joseph, Founder and Managing Partner of Germinate Investor Services LLP.

Investment options

“There are three ways to invest internationally – one you can invest directly in listed international companies / stocks, two you can invest in a country’s index / ETF, three you can invest in a funds – Diversified or thematic. Additionally, an investor can also invest based on geography. For example, we can invest in North America, South America, China or emerging markets. These are dominant themes that play out for Indian investors who wish to consider investing internationally, ”said Joseph.

Invest directly

“There are sites online that allow you to invest directly in these international stocks, but you have to remember that sometimes it is not always easy for multiple reasons. First, all of these stocks are expressed in dollars. When you convert the dollar to Indian rupees, it becomes very expensive. For example, an Amazon stock today costs around $ 3,200. An investor will spend over Rs 2 lakh just for a single Amazon stock, ”Joseph said.

Investing via ETFs

“The second way to invest is to use ETFs offered through mutual funds. ETF requires a demat and trading account, ”said Joseph, adding:“ However, the simplest and easiest way is to use the feed or fund of funds route that invest in companies based in. outside of India. They also offer index funds in this route that invest in foreign indices like S&P 500, NASDAQ, Russell, Dow Jones, etc. You also have the options of gold funds, commodities, technology, including energy and resources, also differentiated by geography. An investor doesn’t necessarily have to worry because many mutual funds already have multiple themes. It’s as easy as investing in any mutual fund in the country.

Invest through international funds

Investing in international funds (funds of funds) has few advantages. Firstly, you don’t need to have a Demat account and a trading account. Secondly, it is very easy to invest because the investor does not have to open an international account or worry about currency fluctuations. Third, you don’t have to worry about the limit you can invest as there is an annual limit via LRS (Liberalized Remittance Scheme) if you are investing directly, but if you are investing in funds that are already available from companies. of Indian mutual funds, you don’t even have to worry about it, ”said Joseph.

“The regular features of SIP, STP and lump sum investment make investing convenient,” he added.

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How to invest

Different investment intermediaries in India have collaborated with their counterparts in other countries to provide opportunities for investors to invest in foreign stocks.

“Investing in foreign stocks and ETFs has become easier than before. Currently, the majority of brokers offer investment opportunities in the US markets because they are the most important and also the most popular, ”said Vamsi Krishna, Head of Products and Marketing, Axis Securities.

“Investing in foreign stocks and ETFs has become easier than before. Currently, the majority of brokers offer to invest in US markets because they are the largest and most popular, ”said Vamsi Krishna, Head of Product and Marketing, Axis Securities.

“To invest in stocks and ETFs listed on the NASDAQ and NYSE, investors must open an account with a broker registered with the Securities and Exchange Commission (SEC). The SEC is the regulator in the United States, like the SEBI in India, ”Krishna added.

Explaining their offerings, Krishna said, “Axis Direct offers global investments through our partner Vested, an investment advisor registered with the SEC. Customers can log into our portal and open an account with Vested fully online by uploading their copies of the Aadhar map and PAN map. Once the KYC has been verified by the central team, clients can use their account to transfer funds and buy stocks and ETFs. Under the Liberalized Money Transfer Program (LRS), clients are allowed to transfer up to $ 250,000 overseas for investing (around Rs 1.8 crore). With Axis Direct’s global investment, clients can not only trade US stocks like Amazon, Tesla or Google, but also get advice and support through model portfolios (Vests). Vests like SAAS and Moat have given over 28% return in the past year. “

Another leading investment intermediary – ICICI Securities – recently announced services for its clients to invest in global equities. ICICI Securities has partnered with ‘Interactive Advisors’ and ‘Interactive Brokers LLC’ for this.

“Through these partnerships, ICICIdirect clients could now invest in portfolios comprised of US stocks and ETFs managed by Interactive Advisors, a US investment advisor, based on models built by renowned global fund managers. as Global X- of Mirae Asset. , State Street Global Advisors, Legg Mason (acquired by Franklin Templeton Investments), Wisdom Tree and other portfolio managers, ”Anupam Guha, Head of Private Wealth Management, ICICI Securities.

“With this association with Interactive Brokers LLC, a United States-based online brokerage firm with multi-asset and multi-geographic trading capabilities, ICICI Securities will also provide opportunities to invest in United States stock exchanges, UK, Japan, Hong Kong, Germany and Singapore, ”he added.

“It makes sense for an investor to consider the options already available, whether it’s an index, a country, a thematic or if an investor just wants global participation. Global exposure is a good way to diversify and take advantage of global market opportunities. You have the option of investing in global companies which may not be listed or present in India. Classic examples are Tesla, Amazon and Google and many other such giants, ”said Joseph.

“Therefore, it is clear that there are significant advantages to investing in global markets. There are multiple opportunities with funds already present and available with the convenience and simplicity of investing in domestic mutual funds, ”he added.

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