How to Invest in International Markets from India?

Picture this: You’re sipping your morning chai in Mumbai, but your investments are traversing the bustling streets of New York and the serene landscapes of Tokyo. The allure of international markets beckons, offering a passport to a world of financial opportunities beyond borders. The Reserve Bank of India (RBI) facilitates this global exploration through the Liberalized Remittance Scheme (LRS), which allows Indian residents to invest up to USD 250,000 (approximately 1.9 crore rupees) annually in international stocks and other assets without requiring special permissions. [Source: Groww]

Imagine diversifying your portfolio with cutting-edge technology giants in Silicon Valley, or gaining exposure to sustainable practices championed by European corporations. In this interconnected era, the savvy Indian investor has the chance to navigate the global financial landscape with ease, whether through ETFs mirroring the S&P 500, venturing into the real estate markets of Singapore via REITs, or embracing the simplicity of robo-advisors optimizing portfolios based on algorithmic precision.

Let us explore the best ways to invest in international markets:

Why Invest in International Markets?

In an era of interconnected economies, sticking solely to domestic markets might not be the wisest strategy. Investing in international markets offers a powerful way to diversify your portfolio and reduce exposure to regional economic downturns and currency fluctuations.

By tapping into global opportunities, you can access emerging markets with high growth potential, benefit from innovations in different industries, and safeguard your investments against local geopolitical events. This broader perspective enhances your financial resilience and opens doors to new opportunities, helping you build a more robust and balanced investment strategy.

How to Invest in International Markets?

Invest Through Exchange-Traded Funds (ETFs):

For Indian investors seeking simplicity in their international investment approach, Exchange-Traded Funds (ETFs) emerge as a popular choice.

Diversification is at your fingertips, as ETFs pool funds from multiple investors to invest in a diversified portfolio of international stocks. With lower expense ratios compared to mutual funds, ETFs provide a cost-effective way to access global markets. Their liquidity and transparency, trading on stock exchanges, offer real-time pricing and accessibility for investors.

Invest Through Global Mutual Funds:

Investors who prefer a more hands-off approach may find global mutual funds, managed by experienced fund managers, to be an ideal choice. According to the Association of Mutual Funds in India (AMFI), there has been a notable increase in the availability of these funds, with over 70 international mutual fund schemes offering global exposure as of mid-2024.

These funds collectively manage assets exceeding ₹50,000 crore (approximately USD 6.7 billion). Fund managers strategically invest in a diversified set of international assets, providing professional expertise and active management. This setup allows investors to benefit from a broad global asset base without the need for direct involvement in stock selection.

Invest Through Direct Equity Investments:

For the adventurous investor, direct investments in international stocks offer the thrill of individual stock selection. Indian investors have shown a strong preference for U.S. and European markets, with U.S. equities being particularly popular. The Nasdaq and S&P 500 indices, featuring major U.S. technology and consumer companies, have attracted significant interest due to their robust performance and growth potential.

However, thorough research and analysis of international companies are crucial. Staying informed about global economic trends, political developments, and industry-specific news is essential. Additionally, currency considerations should be factored in, with potential hedging options explored to protect investments from adverse currency movements.

Invest Through Real Estate Investment Trusts (REITs) Abroad:

Investing in international Real Estate Investment Trusts (REITs) offers Indian investors a unique opportunity to diversify their portfolios beyond traditional equities. By exploring global REITs, you can tap into diverse real estate markets worldwide, accessing properties in thriving cities and sectors not available domestically.

These investments provide the potential for stable income through dividends and capital appreciation from the underlying real estate assets. International REITs can enhance your portfolio’s resilience, offering exposure to global property trends and economic cycles, and adding a layer of stability and growth potential to your investment strategy.

Important Things to Know Before Investing in International Markets:

Dollar-Cost Averaging:

Employing a dollar-cost averaging strategy helps investors navigate market volatility by systematically investing fixed amounts at regular intervals, reducing the impact of short-term market fluctuations on overall portfolio performance.

Geopolitical Analysis:

Keeping an eye on geopolitical developments is crucial, as international investments can be influenced by political events. Conduct thorough geopolitical analysis to make informed decisions and anticipate potential market shifts.

Sustainable and ESG Investing:

Integrating environmental, social, and governance (ESG) factors into investment decisions aligns with global sustainability trends. Explore international markets with a focus on companies committed to ethical practices and sustainability for long-term value creation.

Consider Tax Implications:

Amidst the excitement of venturing into international markets, investors must not overlook the crucial aspect of tax implications. For instance, dividends received from US stocks are subject to a 25% tax in the US for Indian investors, as per the India-US Double Taxation Avoidance Agreement (DTAA).

Understanding the tax implications of international investments is essential for making informed decisions. Consider consulting with tax experts who can provide guidance on the tax treatment of dividends, capital gains, and any other relevant tax considerations associated with your international investments. This ensures that your global portfolio remains tax-efficient and aligns with your financial goals.

Conclusion:

In a world of boundless financial opportunities, Indian investors can strategically diversify their portfolios by exploring international markets. Whether through ETFs, mutual funds, direct equity investments, robo-advisors, REITs, or employing dollar-cost averaging, each avenue offers unique benefits. A blend of research, risk awareness, and adaptability to global trends is the key to unlocking the full potential of international investments, enhancing portfolio resilience and long-term growth.

These tips are brought to you by HappyWise Financial Services.

If you need any assistance with organizing your finances or want to discuss your investment options, feel free to connect through Email or Whatsapp.

Disclaimer: Some parts of this article may have been generated or modified using Generative AI. This article is not intended as financial or investment advice; its objective is to share information. Readers are encouraged to conduct their own research and consult with a financial planner before making any financial decisions.