In the current world scenario, the investment options are not restricted by geographical boundaries. An investor can invest in any kind of share market around the globe. Many young professionals consider investing their money in the international share market as it allows them to diversify their portfolio by spreading out their international stock exchange risk, thus providing them great exposure to various growing economical global stock markets like the U.S stock exchange, London stock exchange, etc.
Here are few reasons why investing in an international share market can prove to be fruitful for the investor;
An international investment diversification was studied in the early 1960s and the observations have shown that by diversifying across nations whose share market cycles were not perfectly correlated, investors could lower the risk of their investment returns at a given level of expected return. Also, the investors should keep in mind that the top-performing companies keep on changing every year. Thus, sticking to a particular nation or asset class could lead them to huge financial losses. The depreciating currency changes also prove fruitful to many investors and thus many financial institutions and advisors suggest having a globally diversified portfolio.
The Subtlety of Investing Abroad
The basic thing an investor needs to have before investing in the international share market is a Demat or trading account with an authorized and recognized broking house. As of now, an Indian investor can invest up to $2,50,000 (approx 1.88 crore rupees) under the Liberalised Remittance Scheme(LRS). Brokerages for investing vary from 1 cent to dollars per trade, depending upon the plan one opts for. Investors can directly invest in overseas shares as well, but these kinds of trades require a significant amount of research and the right mindset while investing.
Investments through Mutual Funds
The easiest way the investor can have exposure to an international stock market is by investing in mutual funds. Many Indian fund institutions have lucrative schemes for such investments in overseas equities. Some investors may have views against global diversification arguing that overseas investment may overlap domestic share capitals. But that is not the case, as companies tend to respond according to local and geopolitical events. The mutual funds are the easiest way of investing as it does not require a separate trading account. The mutual fund investments can be started through the SIP route as well with a bare minimum amount of Rs 500.
An investor should always research and have an in-depth understanding of the economic and geopolitical factors of international trading. Investors should focus on their investment objectives, costs, and prospective returns before investing. A balanced and diversified portfolio with risk calculation always yields a good return to investors.