6 Best Ways to Invest in the International Stock Market
In recent years, stock trading and the stock market have earned maximum attention. Many investors have started investing in the international markets to improve their chances of better returns and portfolio diversification. However, not knowing the best practices to invest in international markets may reduce the chances of higher returns. This post lists out 5 ways to invest in the international market. Keep reading!
Ways to Invest in Foreign Market
1. Have an Account with Indian Brokerage having Foreign Tie-ups
Many full-service Indian brokers, such as – ICICI Direct, HDFC Securities, Kotak Securities, and others, have a relationship with foreign brokers. They have made it extremely simple to open an overseas trading account with one of their partner (foreign) brokers. These full-service brokers can help you invest in foreign stocks.
For example, if you have an ICICI direct account, you can invest in global markets through their broker partner Interactive Brokers LLC.
2. A Foreign Brokerage Account
A few international brokerage firms, such as Interactive Brokers, T.D. Ameritrade, Charles Schwab International Account, and others allow Indian citizens to open accounts and trade U.S. stocks, mutual funds, and other securities. Indeed, US-based brokerages such as ‘Interactive Brokers’ have an office in India where you can visit, get your questions answered, and open your overseas trading account.
3. Investing in Mutual Funds/Equities having Foreign Connections
Several mutual funds and exchange-traded funds (ETFs) invest in international markets (global market, emerging market, etc.). You can use mutual funds/ETFs to invest in foreign equities indirectly. It is the most straightforward method for investing in foreign stocks. One benefit of investing in mutual funds is that you will not need to open an overseas trading account. Furthermore, you will not be required to make a significant financial investment. Investing in mutual funds/ETFs is less expensive than direct investing in foreign stocks (which may require a minimum deposit of $10,000).
4. International Brokers
Handful worldwide brokerage firms permit Indians to open accounts and invest in foreign securities. These firms also offer their clients research and analytics assistance to help them make investment decisions.
5. Mutual Funds
Anybody can invest in international markets by purchasing international mutual funds (M.F.s) in the form of fund of funds or exchange-traded funds (ETFs) that invest in international funds with exposure to international markets. Investing in mutual funds has a low ticket size and does not require an overseas trading account.
6. Online Applications
Many online platforms provide opportunities to invest in foreign securities through their recommended portfolios or themes. Investors can visit the Navi website to compare having a good roadmap to start investing in Mutual Funds globally.
How to Invest in the Global Market?
Here are some of the tips that people can use to invest in the Global Market;
1. Liberalized Remittance Scheme (LRS)
Foreign exchange regulations in India and the rules promulgated thereunder govern investments outside India. Resident Indians can invest in foreign stocks and bonds as part of their portfolio via the RBI’s LRS, which permits them to remit up to $250,000 every fiscal year for any allowed current or capital account transaction, or a combination of both. Investment in the Gift City International Financial Services Center (IFSC) would also fall under the purview of LRS.
2. Direct Investment
An investor can buy foreign stocks directly by opening an overseas trading account with an Indian broker – such as Axis Securities, HDFC Securities, ICICI Direct, and others – that has a partnership with a foreign broker or directly with a foreign broker – such as T.D. Ameritrade, Interactive Brokers, and many others.
3. Mutual Funds
An investor can also invest in the foreign market through mutual funds. He can invest in either an international fund or an Indian fund that invests in foreign stocks. Index funds that invest in foreign indices such as – the S& P 500, NASDAQ 100, Dow Jones, Russell, and others can also be used as an indirect tool to invest in foreign stocks.
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Why should you Invest in Foreign Market?
Spreading your money across tens or hundreds of companies reduces the likelihood that you will lose money overall if one investment fails. Given the vast amount of choice in the U.S. stock market, you may believe you have all the investment options you need to properly diversify without ever considering companies outside of the U.S. Companies that are not traded on U.S. stock exchanges, on the other hand, can be valuable assets with a variety of advantages.
1. Geopolitical Advantage
Going global with your investments may also help you increase your returns by exposing your dollars to faster-growing economies. You might find favorable conditions, such as progressive government leadership, tax breaks, or even access to natural resources and policies that allow an industry to grow at a faster rate than a domestic counterpart.
2. Diversification Of Funds
While some domestic index funds provide limited exposure to international stocks, many experts agree that these funds fall short of providing complete diversification.
Final Word
Adding international stocks to your portfolio can help you avoid having the U.S. dollar dictate all of your potential market upsides. However, as with any investment, you should ensure that you’re allocating an appropriate portion of your portfolio to international investments for your given investing timeline and risk tolerance. If you are ready to start investing in international markets, go to Navi Mutual Fund and get started!
Disclaimer: Mutual Fund investments are subject to market risks; read all scheme-related documents carefully before investing.
FAQs
Ans: The market value of publicly traded securities is capitalization. Currently, foreign stocks account for roughly 57 percent of all stocks worldwide, implying that foreign reserves should account for approximately 57 percent of your stock investments.
Ans: Investing in international equities may help you increase your returns. Historically, global stock markets have outperformed U.S. markets, prompting many advisors to recommend investing between 30% and 50% of your portfolio internationally. Having both helps to balance a portfolio.
Ans: A stock traded in financial centers both outside and inside the country of issue.
Ans: Furthermore, foreign stocks yield more than U.S. stocks on average, and they pay dividends in their currencies, which are more valuable to U.S. shareholders when the dollar falls.
Ans: There is no requirement for citizenship to own stocks in American companies. Even if a non-US citizen can legally trade U.S. stocks and bonds, it may be necessary (in addition to being advisable) for them to consult with an investment firm and use the services of a professional.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
