Investing is an act of wealth creation where there are lots of opportunities across the globe.
Traditionally an investor restricts his reach of instruments within a certain geographic boundary and invests in the stock markets of the country where he or she is physically located.
Indian Investors will usually and mostly invest in Indian stock markets.
But, there are options for a retail investor to explore some known favorite brands and investments which have its roots in other countries.
Both positives and negative comes along with choosing to invest n foreign markets
Advantages of Investing in Foreign Markets:
- Geographical risk can be mitigated
- Benefits of diversification across markets
- Opportunity to participate in global economic growth when the domestic markets are not offering enough returns
- Opportunity to invest in the companies that own some of your famous foreign brands
- Indian companies historically tend to offer lower dividends. They usually reinvest the returns for growth. So, if you are looking for a stable dividend income you can prefer this option
- Exposure to political risk can be mitigated to a certain level
- Exchange rate volatility
Dis-Advantages of investing in Foreign Markets:
- An Indian National or a resident can invest in foreign markets by opening a brokerage account who have tie-ups with a foreign brokerage company.
- You can also open an account with a foreign brokerage company directly. If you prefer to choose this method, you can cut a layer of middleman and its respective brokerage charges
- This can either be an investment account linked to your domestic savings bank account or an online trading account.
Investing Directly In US Markets through Brokerage firms:
An Indian investor can invest both in stocks and ETF’s trading on the US stock Markets
SEC ( Securities and Exchange Commission ) registered brokerages and investment advisors are offering brokerage accounts for Indians to trade or invest in US stocks
Some brokerages are even offering no commission accounts
Currency wire transfer charges and conversion charges may be applicable
An Indian resident can send $2,50,000 per annum abroad, legally under the LRS ( Liberalised Remittance Scheme ) , without RBI approval
Safety Of Funds in case of Risk:
The money will usually rest in a 3rd party custodian’s account in case the brokerage company shuts down.
In case if both shuts down, SPIC insurance will gets activated ( as per SIPC- Securities, Investor Protection Corporation)
The insurance applies to a sum of that $2,50,000 in cash along with a securities value of $500,000
How much Can Indian Investors invest in foreign markets:
There are options for you to invest in fractional shares. You can even purchase 1/10 th of a stock of Google or Apple and add them to your portfolio to add a layer of diversification
Investible SIP limits start with as low as INR 1000
Brokerages offering Such Accounts:
Investing in International Mutual Funds and ETF’s:
The easiest way is to invest in foreign markets is through international mutual funds
There are a lot of Indian AMC’s that offer you mutual funds and exchange-traded funds that invest in foreign stocks and securities.
They usually manage a large sum of money collected from various investors and invest the pool of money in a diversified set of foreign companies
Qualified fund Managers will manage those funds through research and due diligence
Sundaram Global brand Fund
On a repatriable basis, the gains are not taxable in the US. The capital gains on Investment returns are taxable in India based on the holding period.
24 months is the threshold period to consider for LTCG. The rest held under that will be termed under short term capital gains and will be taxed at 20%.
Dividends will be taxed at 25% in the US ( You can claim exemption from double taxation for this as a foreign tax credit )
Investing Indirectly through a foreign account if the fund is not needed to be brought to India
Read More: Step By Step process of how to invest directly in international stocks:
Read More: Process of how to invest in international stocks through mutual funds: