Globalization, technological advancement, and income growth have promoted cross-border investment. As an investor, you now have the opportunity to enter different markets, buy stocks, diverse portfolio, and enjoy the maximum return.
Investing or trading in foreign stocks is now growing in popularity. Therefore, if you are intrigued by investment in any interesting stocks across the globe, here are smart ways to go about it.
Investing in the Foreign Market from India
Many consider investment in the US, Europe, or any other part of the world as a great way to build a healthy portfolio. Investors can spread risks, and benefits from diversification. Not only that, you gain exposure to different markets and economies of other countries including access to limitless opportunities.
You can simply just open an overseas account in India either through a domestic or international broker. Other countries such as Singapore, China, Brazil, Hong Kong, the United Kingdom among others are booming and emerging markets that favour investment.
Although foreign investment has its downsides, an investor can still reap the benefits-that is, when you play the game right and smart!
How to Invest in Foreign Stocks?
These are smart ways to invest in US stocks or any international foreign stocks that strikes your fancy from India:
Global Depository Receipts (GDRs)
If you are looking to invest in foreign securities that are not traded on the local stock exchange, GDR is a good option. Although the shares themselves are traded locally, various intermediaries such as banks make them available for sales in foreign markets.
GDR are typically denominated in US dollars or Euros and are similarly traded and settled as domestic stock. Another thing is investors can trade in multiple markets as they are considered a negotiable instrument. It can be denominated in any freely convertible currency.
Foreign Direct Investment
Foreign investment is another direct way of investment in the international market. However, it can be challenging in regards to cost, tax, research, differences in currencies among other factors. Under the RBI’s Liberalized Remittance Scheme, individual investors can invest up to $250,000 annually overseas. However, this is not always a good option for regular investors.
One easiest way to go about this is to open an international account through a broker in your home country to invest in foreign stocks. For instance, HDFC Securities LTD is in partnership with Stocks, New York.
Another option is to open an international account with brokerages in a foreign country. A good example is a Hong Kong-based trading platform, MONEX BOOM. This platform gives access to the Hong Kong stock market including 11 others.
International Exchange-traded Funds (ETFs)
An investor can also opt for an ETF of foreign-based securities. Some provide access to a wide range of international stocks. While others offer or track a country-specific stock.
ETF can cover specific sectors like World Energy Fund, Agricultural Fund. Some are continent specific such as a “Europe Fund”, ASEAN Fund. Some are based on market capitalization.
Global Mutual Funds
A global mutual fund allows you to invest in countries across the globe including the investor’s own country. Many mutual funds identify the best investments globally and include them in the equity mix.
Investors do not need a trading account neither do they have to maintain a minimum deposit as funds are managed by mutual fund houses. It is cost-effective, easy and you do not need to go through the hassle of foreign investment. However, it comes with a heavy price tag due to the high cost and fees.
This type gives you exposure to global leaders like Apple, Ford, Facebook, Coca-Cola,(to emotion a few). A multinational company generally has A presence in different countries. Therefore, investors can consider these companies that generate a huge part of their revenues abroad.
This is a good option if you are not up to the stress that comes with foreign direct investment or not comfortable with mutual funds and GDR.
Although foreign stocks have a lot of benefits, they are however not immune to risks. Therefore, investors should not just walk blindly into the international market. Study the market, the pros and cons, and how it matches the overall risks.Do thorough research on foreign stock brokers and align your strategy with investment goals.