Introduction:
In today's interconnected world, investing outside India has become not just a possibility but often a prudent strategy for diversifying your investment portfolio and seeking potentially higher returns. As an Indian investor, exploring overseas investments can provide access to a broader range of assets, geographical diversification, and exposure to industries and economies that may not be readily available domestically.
However, venturing into global markets requires careful consideration and understanding. This blog serves as a comprehensive guide to teach you how to approach investing outside India. Keep reading.
Benefits of investing outside India
Before you delve into how to make overseas investments, you must explore the benefits of doing so. Read below:
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Portfolio diversification
Diversifying your investment portfolio across different countries and regions helps mitigate risks associated with any single economy or market downturn. It allows you to spread your investment across various currencies, industries, and asset classes.
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Access to global investment opportunities
Investing internationally provides access to industries and companies that may not be available in the Indian market. This exposure can offer opportunities for growth and potentially higher returns than what is achievable solely within India.
Investing in assets denominated in different currencies can act as a hedge against currency risk. It provides protection against the depreciation of the Indian rupee and may enhance overall portfolio stability.
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Potential for higher returns
Some international investment instruments may offer growth prospects and valuations that are more attractive compared to domestic markets. Investing in such avenues can provide potentially higher capital appreciation in the long term.
Where to invest outside India?
Below are the instruments in which you can invest outside India:
As an Indian national, you can invest in international mutual funds. These instruments offer exposure to global markets, including investments in foreign equities. Additionally, you can consider investing in foreign Exchange Traded Funds (ETFs) that provide access to prominent global indices such as NASDAQ.
These investment instruments typically fall within the total Liberalized Remittance Scheme (LRS) limit, and there is no reporting requirement under the current regulations.
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Stocks listed on foreign stock exchanges
As a resident of India, you can also invest in the stocks of foreign companies listed on the stock exchanges, provided your holding does not exceed 10%. However, it does not confer control over the foreign company in which you are investing.
All you need to do is open an overseas trading account in India with a registered stockbroker and start investing in the stocks of foreign companies. You can also open a Demat and trading account with a foreign stockbroker that offers its services in India.
You can invest in index funds that replicate international stock market indices. For example, the Motilal Oswal S&P 500 Index Fund is India's first Index Fund tracking the performance of the S&P 500 Index, a major US stock market index. Investing in such indices offers advantages such as diversification and potentially higher returns.
If you have a substantial amount to invest, you can also opt to invest in a foreign real estate property. Depending on the laws and regulations of the specific country, you may or may not be allowed to invest in real estate there. Make sure to understand all such complications before deciding to invest in an abroad property.
Key considerations before investing
Below are the factors you can consider before investing outside India:
Different countries have varying regulations regarding foreign investment. Familiarise yourself with such regulations, including tax implications, reporting requirements, and any restrictions on foreign ownership.
Fluctuations in exchange rates can impact the returns of your international investments. Assess the potential currency risks and consider strategies such as hedging or diversifying currency exposure to manage these risks.
The availability of several investment avenues might confuse you. Choose the one that aligns with your financial goals, risk appetite, and investment horizon.
The bottom line
Investing outside India can be a rewarding endeavour for Indian investors seeking to broaden their investment horizons and enhance portfolio diversification. By understanding the opportunities, risks, and considerations involved, you can make informed decisions and effectively navigate the complexities of international investing.
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