Simple ways to invest in international stocks from India

Share Now

Companies have the ability to invest in any country thanks to globalization and cross-border investing. Indian investors have the opportunity to invest in foreign stocks. Smart investing can help you grow your portfolio and get higher returns. Let's start by defining foreign stocks.

 

What are foreign stocks?

Foreign stocks are stock from foreign companies, or those based in India. These multinational companies, which are often not domestic, make a great investment choice. They also offer the opportunity to invest in blue-chip companies. Foreign stocks can be a great way to balance your portfolio and capitalize on the lucrative opportunities in foreign markets. These are the three options available to Indian investors who want to invest in foreign stocks.

 

Indian fund houses with foreign tie-ups

Indian fund houses are one of the most convenient ways to invest in foreign stock. Investors can access foreign stocks without having to apply for permission. Look out for names such as "Emerging Market" or "Europe Focus" to find Indian mutual fund houses that offer these opportunities. These names indicate that these mutual funds have made foreign stock investments via local markets. You can easily track the movement of these stocks by looking at their NAV.

An alternative option to foreign share-trading is to look into mutual funds called funds of funds (FoF). These mutual funds buy units in international stock. You can keep an eye on economic developments in international markets and also have a buffer for volatile performance in Indian stock exchange. Invest in foreign stocks by way of a fund investment. This can provide a hedge against falling Sensex. Many global companies have outperformed their peers by huge margins. FoF is a great way to dive into their success.

 

Direct Investment

Directly investing in international funds is a more direct way to trade foreign shares, but it requires significantly more investment. According to RBI (Reserve Bank of India), Indian citizens have the right to invest a maximum of $250,000 annually in foreign direct investments without any permissions. This is part the RBI's Liberalized Remittance Scheme, (LRS).

There is an annual limit on how much money can be invested in any one year. However, the international fund doesn't have any limits. An international broker can open an trading account. To open an account with an American international broker, you don't need a US mailing address.

 

Exchange-Traded Funds

Third, you can invest in exchange-traded money for foreign share trading. The average ETF's prices fluctuate throughout the day. It can be bought and sold all day. This is different from mutual funds, which are only sold or purchased once per day after the markets close. Exchange-traded funds can be purchased on international indices. This gives you the necessary exposure to a range of stocks around the world. These funds can be accessed without exposure to foreign markets. Indian brokers can also provide exchange-traded funds for investment options from local markets.

Make sure that the ETF that you are interested in investing in is registered with India's Securities and Exchange Board. ETFs can be used to reduce their risk of being trained. These funds, in large part, simply replicate the movements of an index. ETFs have a lower expense ratio than mutual funds. ETFs can only be invested in if you have a brokerage account. This can be with an Indian company or international one. This is however all you will need to have access to these funds.

 

Conclusion

It is important to understand the risks involved in foreign share trading now that you know about three possible routes. First, currency exchange is a risk. Even if your foreign stocks make you money, falling rupee rates could affect your exchange rate and increase the risk of losing your investment.

It is also more costly to open international trading accounts than with Indian brokers. The margin money requirement for international trading accounts is much higher than that of an average Indian broker. The brokerage fees are also higher. It ranges from 0.7% to 0.75% per trade in the US. These risks can make it difficult to make wise investments in foreign shares.

Subscribe To Our Newsletter

Subscribe to our newsletter to receive up to date news, ideas and resources to help to manage your investment and risks.