Stocks in India have had a good run in the past year, thanks to strong FDI coming here in India and much scope in future as when eps of the company start to rise all the stocks which are looking expensive now would look cheaper in future
However, that has not always been the case. The historical performance over the past four decades shows that domestic and international stocks moved in a cycle of alternating outperformance. While past performance is no guarantee of future performance, this suggests that the cycle could very well be expected to swing back toward international stocks at some point
Timing these rotations is difficult. This is why it may be important to have both Indian and international market exposure in an equity portfolio. Investors underexposed to foreign stocks could miss significant gains when markets overseas rally.
Methods to invest in international funds
- Indian broker tie-up with a foreign broker Many Indian brokers has tied up with international brokers to give their clients good returns many full-service fund houses provide the access to invest in foreign stocks. Like 5paisa, Vested Finance, ICICI Direct, Reliance Money, Kotak Securities, and various others
- Opening account with foreign brokers: Some international brokerage firms allow Indian investors to quench their thirst for higher returns by investing in global stocks. You will be surprised to know that one of the brokers named ‘Interactive Brokers’ has a registered company in India.
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- Investing in Mutual Funds with global equities: As you know Mutual Funds are quite popular in India so many Indian mutual funds have come up with funds that will hold international securities on your behalf. These funds with international stocks are outperforming the Indian mutual funds. Investing in mutual funds that consist of global equities is considered the easiest and hassle-free method to invest in international stocks. Also, you don’t have to pay a hefty amount to invest in these mutual funds. So, it is a cheaper and better alternative to invest in foreign stocks. Below are examples of funds with their past returns.
Mirae Asset has also launched an ETF known as MAFANG in May which follows the Fang index this index comprises facebook, alphabet, Baidu, Netflix, Google, Tesla. Many Indians are very keen to invest in these companies as many companies are much popular here in India. This fund has given a whopping 12% return in just one month.
Risk in international stocks
Currency Risk: When investing directly in a foreign market you first have to exchange your Indian Rupee for a foreign currency at the current exchange rate. Say you hold the foreign stock for a year and then sell it. That means you will have to convert the foreign currency back into INR. That could help or hurt your return, depending on which way the rupee is moving. This uncertainty scares off many investors.
Upper limit: According to RBI, an Indian resident can invest up to $250k overseas annually. Considering $1= Rs 74.33, you can invest Rs 1.85 Cr in the overseas market.
Benefits in International stocks
To Reduce Risk: International portfolio is used to reduce investment risk. If Indian stocks underperform, gains in the investor’s international holdings can smooth out returns. For example, an investor may split a portfolio evenly between foreign and domestic holdings. The domestic portfolio may decline by 10% while the international portfolio could advance 20%, leaving the investor with an overall net return of 10%. Risk can be reduced further by holding a selection of stocks from developed and emerging markets in the international portfolio.
Popular companies: From watching videos on YouTube to investing in it, from browsing on Chrome to mailing through Gmail, Watching Tesla running on autopilot we all want to invest in Elon Musk companies. We all admire Bill Gates, Jack Ma, Mark Zuckerberg, Elon Musk, and their CEO’s Sundar Pichai, Satya Nadella. After seeing what they have achieved and believe in their ideas why we shouldn’t invest in their companies.
Opportunities: If you look at the price of Tesla, you will realize how powerful the international markets are. It went from $162 to $682 in just one year. A massive 320% return. There are many examples like Tesla so we should not miss the opportunities to invest in these companies.
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