How to Explain International Stock Market to Someone Who Knows Nothing About It

The international share market is an attractive investment destination for mature and experienced investors. However, if you are an amateur or a beginner, here is your handy guide to know it all.

What is the International Share Market?

The international share market refers to foreign exchanges in different countries where you can invest your money in stocks. A few of the popular international stock exchanges are:

• New York Stock Exchange (NYSE)

• NASDAQ

• Tokyo Stock Exchange

• Shanghai Stock Exchange

• Euronext

Indian investors are eligible to invest in global stock markets. However, do note that terms and conditions vary from one stock market to another. 

What are the Benefits of Investing in the International Share Market?

Investors like to invest their money in global share markets to reap the following benefits:

• Diversification: You must have heard the famous financial mantra ‘Do not put all your eggs in one basket.’ This means that you should diversify your investment portfolio across different financial instruments and asset classes to maximize returns and minimize risks. International stock markets give you a good opportunity to diversify your investment.

• Knowledge of Global Markets: Foreign stock exchanges have different dynamics than domestic markets. You need to study various parameters that govern international markets – economic performance, socio-cultural factors, geopolitical shifts, etc. This helps you to acquire knowledge of international investments.

• More Options: If you have exhausted all investment options in the Indian stock market, then it is a good idea to explore foreign exchanges to expand your portfolio.

How to Invest in the International Share Market?

You can invest through any of the modes:

• Liberalized Remittance Scheme (LRS)

• Investment in foreign stocks listed NSE International Exchange (NSE IFSC) and India International Exchange Limited (IFSC/India INX) based in Gujarat International Finance Tec-City (GIFT City)

• International mutual funds

• Direct investment through an online investment broker based in India

What Factors to Consider While Investing in International Share Markets?

You should bear in mind the following factors before investing in global stock markets:

• Volatility Risk: Even foreign stock exchanges are vulnerable to volatility. So, you should be prepared for price fluctuations in any direction.

• Country Risk: Every country has its fair share of economic, political, and social issues that can impact the markets. It is important to know these risks before you invest.

• Transaction Costs: The transaction costs of international stock trading are likely to be higher than domestic trading. You have to take into brokerage charges, bank charges, depository charges, and any other charges as applicable.

• Tax Implications: The taxation of foreign stocks is different from Indian stocks. Make sure to understand both the global and Indian taxation implications of your investment. Or else, you might end up losing money on your investment.