As the economies of the world are getting more and more interlinked with each passing day, it only makes sense for investors to diversify their portfolios across various foreign markets. The investment scenario in India is gradually catching up to the “4th largest economy of the world” status. It is high time, that Indian investors should learn and benefit from markets
The Big Question – Why Bother?
There are three main reasons why Indians should even consider investing outside India.
- Diversification of portfolio
- Protection against Rupee depriciation
- Exposure to high growth sectors like Artificial Intelligence, Clean Energy etc., that have not gained much prominence in India, yet.
The Process- How to Invest?
The Reserve Bank of India (RBI) in 2004 had announced LRS- Liberalised Remmitances Scheme that allows Indian citizens to invest in foreign assets. The maximum amount is capped at 250,000USD (₹ 2 Crore) per individual per financial year.
There are multiple options from where one can start his/her international investment journey :
- Indian Platforms: Many Indian brokers like INDMONEY, GROWW, AngelOne, VESTED etc., provide their clients with access to international markets. One thing to keep in mind is that such platforms only allow investments(delayed by atleast 24 hours) and not live market trading. Paperwork is minimal for these platforms.
- International Brokers: Some international brokers like Interactive Brokers, TD Ameritrade, NinjaTrader etc., have started their services for Indian clients allowing them to invest across internationally. These platforms allow for trading as well as investing. However, the onboarding process and paperwork is tiresome.
- Funds of Funds: or Feeder Funds are offered by several Indian AMCs like HDFCAMC, UTIAMC, ABSLAMC that invest in equities and ETFs of other countries. Paperwork again, is minimal and is best suited for those Indian investors who are new to this dimension and don’t want to handle brokerage accounts or manage remmitances.
The Destination – Where to Invest?
With the ever changing geopilitical dynamics, emergence of groundbreaking technologies like AI and evolving economies, it becomes pertinent to balance risk with rewardand safety with growth. Keeping this balance can be tricky, so here are some options to consider:
- US of America : The land of opportunities and the world’s most dynamic market, offers a complete range of investment options from rock solid giants like Apple, Microsoft, Tesla to innovation engines of AI like NVIDIA, Alphabet(GOOGLE), META (Facebook).
Sectors to keep in focus:
- Artifical Intelligence
- Cloud Computing
- Green Energy
- Semiconductors
- VIETNAM : After India, Vietnam is the only Asian country that is set to become the manufacturing powerhouse, challenging China in global supply chains. Exactly poised like India in terms of young population, stable economic policies and increasing FDI makes it an attaractive alternate to India for investment.
Sectors to keep in focus:
- Manufacturing
- Infrastructure
- Retail and Consumer Goods
- ISRAEL: A country that has been trapped in conflict since the day it came into existence, and yet has established itself as the startup capital of the world, known for cybersecurity, biotech and high number of tech IPOs and global patents, Israel can prove to be an interesting investment destination in the long run. Investments can be made through NASDAQ listed Israeli companies like Check Point, NICE etc.
Sectors to keep in focus:
- Artificial Intelligence
- Cyber Security
- Medical tech
- Defence Tech
Other countries that can be connsidered for opportunities of capital infusion and asset purchasing are Japan for robotics, Singapore for real estate, Germany for industrial automation, Australia for mining and agriculture, South Korea for consumer electronics are great. It solely depends on which sector the investor is focusing, and the sector which is going to see the highest growth in near future.
The Risk- What to keep in mind?
Investing beyond boundaries certainly comes with some risks associated. Though, keeping a regular tab on things can make it easy to manage such risks. The most important points being:
- Currency change: returns get directly impacted by fluctuations of foreign currencies, which one have no control over.
- Regulations: Different countries means different regualtions, different laws, different taxes and different political factors, that may directly affect the returns.
- Diversification: Too much diversification is also a bad bad policy, as bad as no diversification. Its crucial to find the right balance to maximise ROI.
The Bottom Line- What changed?
Investment opportunities across borders now is neither a luxury limited to HNIs and ultra wealthy Indians, nor it is a complex endeavour tailored for investment bankers. With the correct guidance, right platforms, proper paperwork and legal documents, and a clear definition of risk apetite in propotion to long term goals, common Indian can not only participate in global wealth creation, but also tap into new growth frontiers
