Investing globally: Options for Indian Residents

Investors in the 21st century should be well-informed and aware of different markets’ performance. Today, there are no geographical boundaries for investors, and they can explore investment opportunities in different countries and get good returns. If you plan to invest in international markets, it is essential to understand the need – why should you invest in the global market?

• Diversification: As a financial advisory firm, we always create a diversified portfolio for our investors. We also educate them on the need for the same. The reason is simple – you should not keep all your eggs in the same basket. In the investing world, you should have different financial instruments in your portfolio for diversification. By investing in international funds, you diversify your portfolio even further.

• Risks and Returns: Some international markets have delivered better returns than India and may continue to do so. When you invest in such a market, you give yourself a chance to get higher returns. However, you must be careful while choosing the market. The risk will depend on the market conditions and macroeconomic factors of the country you are investing in. It requires expertise to evaluate the economies to invest in.

• Inflation Hedge: Investing in global funds is also a good way to hedge against inflation.

There are different options through which you can invest in the global market. Before you invest in any form, you must understand the risk. Below are some options we suggest to our clients. The suggestion varies as per the client’s risk profile and investment goals.

Listed Stocks: Investors can pick an economy that they believe is stable. Once done, the next step is to invest directly in the best stocks in the country. For example, if you want to invest in US stocks, you can pick companies that have been consistently generating returns for investors. We help investors end-to-end with investing in companies from the international market.

Exchange-Traded Funds (ETF): Investing in direct stocks comes with a risk and is not suitable for every investor. Investors looking to stay invested for the long term and looking for low volatility can invest in foreign companies through ETFs around the popular index. ETFs not only give you the option to invest in equity but also in commodities and can further diversify your portfolio.

Active funds: These are the easiest way to invest in foreign funds. There are mutual funds available for Indian investors that invest in foreign companies. You get the option to invest in economies like the US, China, and other emerging economies. It works just like any other mutual fund. The difference is – the underlying asset in these mutual funds are not Indian companies but international companies or international funds.

Unlisted companies: Many unlisted companies in different geographies are profitable, and you may want to have shares of those companies. For example, if given an opportunity to invest in SpaceX, would you like to own the stocks of SpaceX? If you want to invest in unlisted companies, you must consult a financial service provider as it requires experience and expertise in investing in unlisted companies.

Private equity funds: Have you heard of the Medallion fund? It is one of the best-performing funds in history. Unfortunately, it is a closed fund and not available for retail investors. However, there are ways to invest in private equity funds.

When it comes to international investment, 99% of investors think of the US market. However, it is not the only option. Many world economies have the potential to deliver high returns to investors. They all should be explored before investing.

• You get the opportunity to invest in the fastest-growing markets.
• You insulate yourself against the ups and downs of the equity markets in your own country.
• You diversify your portfolio, reduce risk and get a chance to get good returns.
• If you plan an overseas education for your child, investing overseas can be a hedge against currency depreciation.

• Your investment is exposed to market risks that you may not be completely aware of as it may be hard to track all the developments there.

• If there is a depreciation in the currency into which one has invested, it will have a negative impact on your portfolio.

Right Horizons, over the years has integrated international investments in the portfolios of its high net-worth clients to create a diversified portfolio. Get in touch with us, and we will help you create a portfolio that will minimize your risk and maximize your returns based on your risk profile.