With economic recovery in most countries, Indian retail investors are now diversifying as well as widening their investment horizon to gain massive returns from foreign equity markets.
Strategic investment is an art, and with growing awareness on the equity investment, more and more people are looking to invest in companies based in abroad. With economic recovery in most countries, Indian retail investors are diversifying as well as widening their investment horizon to gain massive returns from foreign equity markets.
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For instance, Wall Street is the home to some of the multi-billionaire stocks in the world, like Google, Facebook, Tesla, Microsoft, Amazon, Apple and so many more. Buying these stocks allow Indian investors to diversify their portfolio, seize bigger opportunities and also maximize gains.
However, there are few cons of investing in foreign stocks, like high charges by brokerages. For instance, if you are trading in US stocks, you have to be ready to pay high charges to the brokerages in dollars. Another disadvantage is profits will always be subjected to currency exchange rate. For example, if you invested in a US stock at $1 (Rs 70) in 2019, but a year later, the Indian currency got stronger ($1= Rs 68), then you will have to register some losses. Furthermore, one has to also be mindful of the applicable taxes charged by the US and Indian taxation laws.
Another key thing to remember is that RBI's notification in the Liberalised Remittance Scheme (LRS) allows Indian resident individual to invest only up to $250,000 ( around Rs 2 crore) overseas per year without any special permissions.
Here's how you can invest in foreign stocks:
Open an overseas account with Indian brokerage:
This is the easiest way out for any Indian retail investor, as 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.
The most popular Indian brokerage Zerodha is planning to offer option to invest in US stocks with no minimum investment, however, this is still in the pipeline.
However, it is important to remember that this service will have some restrictions depending on brokerages. Based on the firm, you might have some restrictions on certain investment vehicles or the number of trades that you can make, etc.
Open an account with foreign brokerages: Stock brokers like Charles Schwab International Account, Interactive Brokers, TD Ameritrade etc. give access to Indian investors to open an account and trade in US securities and mutual funds. Before investing, make sure you understand the fee structure before opening an account.
Buy Indian mutual funds/ETFs with global equities: This is an indirect way of investing in global equities, also cost-efficient given that investors will not have open any account or maintain a minimum deposit. There are many mutual funds who directly invest in foreign stocks. For example, Motilal Oswal has recently started with 'Motilal Oswal S&P500 Index Fund' which invests in 500 listed companies in US.
Other mutual funds like ICICI Pru US Bluechip Equity, Motilal Oswal NASDAQ 100 ETF, Edelweiss Greater China Equity Direct and various others also trade in global equities.
(Edited by : Jomy)