Are you ready to take the next step in your investment journey and go global? From imported products to international TV shows, your interests are no longer limited to a geographical boundary. So why should your investments?
As economies become digital and enable you to carry out transactions in any part of the world, global market investing has become common among investors today. Technology has made it easier than ever to invest in the stocks of a company located in a foreign land. What’s more? You can invest and manage your international stocks without even leaving the country. Let’s dive into global market investing in detail and look at how it can transform your investment game.
What is international investing?
International investment enables you to invest in securities or financial assets in countries across the world. You can invest in international stocks to diversify your portfolio, maximise returns, enjoy more stability, etc. There are two ways for international investing –
- Invest directly in the stock market of your preferred company.
- Invest in Indian mutual funds that invest in global equity.
Benefits of international investing
Investing in international stocks may seem tricky, but it can help you build a strong portfolio with greater stability. Here’s how-
1. Investment diversification
Diversification is one of the primary benefits of international investing. Investors are quickly shifting focus from indigenous to international markets. By parking your money in different investment vehicles across geographies, you significantly reduce your risk.
As the correlation between geographies is usually low, even if one country faces an economic slowdown, it’ll only have a limited impact on your portfolio. Diversification also provides stability to your portfolio by guarding it against market volatility.
2. Multiple investment options
With global market investing, your investment options are not only limited to your country. You can invest in financial instruments that are not available in India and enjoy high returns. You can also invest in international stocks of different sectors. For example, you can invest in the engineering space in Europe, commodities in Australia, or technology in the US market.
Moreover, you can invest in multiple countries through ETFs. For example, you can use the EWZ ETF to invest in the Brazilian market or the US-listed EWG ETF to invest in German equities. International investing enables you to invest in industry giants across the world.
3. Currency appreciation
You benefit from international investment not only in terms of profit on the investment but also in the form of currency fluctuation. When the value of overseas currency appreciates against the value of the domestic currency, you earn extra returns.
Look at it in this way- Suppose you purchased a US stock for Rs. 7 lakhs when the rupee was trading at Rs. 70/$. Now, you decided to sell this stock when its value became Rs. 8 lakhs. At the same time, the value of the dollar appreciated and the value of the rupee became Rs. 75/$. Hence, in addition to the gain of Rs. 1 lakh on your investment, you also gain from the appreciation of the dollar.
4. Low cost of transaction
As more and more investors shift to international investment options, many fund houses and AMCs are launching mutual fund schemes to invest specifically in global markets. This reduces your overall transaction costs by eliminating expenses like transfer fees, foreign exchange conversion fees, annual maintenance charges, etc.
This not only provides hassle-free international investment options but also makes it more affordable. However, these charges vary from AMC to AMC. So, make sure you check with the AMC or your broker before you start investing.
5. Protection against frauds
Another important benefit of international investing is it guards you against fraudulent activities or liquidations. How? Well, most developed economies have stringent regulations to prevent market abuse and protect the interest of investors. This ensures that you are not scammed, and your investment is protected.
How much should you invest in global markets?
Ideally, you should invest at least 20% of your portfolio in international stocks. However, this percentage can be modified depending on your risk appetite, financial goals, investment expertise, etc. You can also invest through ETFs or mutual funds as they are cheaper and more convenient.
The bottom line
Global market investing is not on the back burner anymore. It can reward you with high returns and stability. But before making any decisions, study the economic condition, political stability, and the market of the country you want to invest in. By investing in international stocks, you can build a solid portfolio and guard yourself against market volatility.
You can also download Tata Capital’s Moneyfy app to explore a wide range of investment options and start investing for your life goals. Visit our website to know more.