International stocks, or shares of companies based in countries other than yours, can help diversify your portfolios, hedge against risk, and capitalize on growth in economies other than yours.
The volatility of your portfolio will be more fairly dispersed if you own securities and assets from domestic and international markets because foreign markets don’t always rise and fall simultaneously as the Indian market. Compared to holding only domestic securities, this might help spread out the risk in your portfolio. You can conveniently trade foreign stocks through a stocks investment app nowadays.
With the online investing and trading platform, you can monitor and track investment of your stocks, mutual funds, and ETFs.
Indian investors have long been preoccupied with the amount of capital that foreigners bring into their markets. Indians are now starting to invest abroad in more significant numbers as well.
Indians invested $19,611 million in 2021–22, up from $12,684 million the year before, according to figures from the Reserve Bank of India (RBI). For quite some time, savvy investors have used the Liberalized Remittance Scheme (LRS) of the Indian government, which permits every resident Indian individual to send $2,50,000 outside per financial year to invest a portion of their money abroad for better diversification. The initial investment was just $25,000 when the scheme began in 2004.
For those who want to invest in GOOGLE (Alphabet), APPLE, NFLX (Netflix), TWTR (Twitter), or any other foreign company stocks from India, there is a problem with the current situation: how to invest? It is clear from the fact that neither the Bombay Stock Exchange (BSE) nor the National Stock Exchange list these businesses for trading (NSE).
You can invest in global stocks from India by creating an account with an Indian broker who allows foreign stocks investment or has a tie-up with a foreign broker. If not, you can start investing in foreign equities by directly opening an account with a foreign brokerage.
Here are three methods for Indian investors to invest in foreign stocks.
- Foreign partnerships between Indian fund houses:
Through Indian investment houses, one of the simplest ways to buy overseas stocks. Investors can now access overseas equities without having to deal with the headaches of getting permission or taking risks when trading in other currencies.
- International brokerages:
Similar to purchasing stocks listed on the Nifty 50 or Sensex, you can buy US shares from India. To open an international brokerage account, you must follow the appropriate steps and fulfil the RBI’s LRS standards. You can get in touch with any foreign brokers in India for all of this.
- Exchange-Traded Funds:
To access the foreign stock market, we can invest in funds of funds (FoF) mutual funds; however, mutual funds are only appropriate for some investors. Additionally, there is only one choice left if you are hesitant to make direct investments in a foreign market yet do not want to use mutual funds: exchange-traded funds (ETFs). One of the most significant distinctions between ETFs and mutual funds is when you can purchase and sell them. Unlike ETFs, which can be exchanged at any time of the day, mutual funds can only be traded (bought and sold) after the market closes.
There are myriad ways to diversify your portfolio by investing abroad, ranging from direct equities to mutual funds and exchange-traded funds. In addition to diversifying across asset classes, market capitalization, sectors, etc., within a country, diversifying geographically helps to manage your portfolio’s risk-adjusted return. The impact on global economies may differ, and it is always better to remain diversified geographically to manage portfolio risk better.