Recently, Apple Inc. was in the news for reaching market capitalisation of $2.0 trillion, which is more than 50% of India’s GDP. Bewildered by the hefty returns of Apple Inc., many Indian investors expressed their willingness to invest in the Company. However, shares of Apple Inc. are not listed on Indian bourses.
Before we move ahead with the ways to invest in international stocks, let us learn about the merits and demerits of investing in international stocks. If you look around yourself, you are surrounded with products of international companies. When you binge watch your favourite show on Netflix/Amazon Prime, on your Apple/Samsung smartphone, while sipping Coca Cola/Pepsi and having your Lays potato chips, you are unknowingly boosting the share prices of these companies. Have you ever considered that you could invest in these companies too, and earn handsome returns? If not, consider it now!
Portfolio diversification is one of the important feature of successful investing. In the Asian Financial Crisis of 1997, markets all across Asia suffered, in contrast to western markets. Hence, by investing in international stocks one can gain geographic diversification of the portfolio. However, sky is not always blue, i.e. there are some inherent risks while investing in international equities. The biggest amongst them is: currency risk. Apple Inc. is listed in the US stock market. So, to invest in Apple Inc. you need to first buy US Dollar and then use your US Dollar to buy shares of Apple Inc. You may incur significant loss, in case of exchange rate volatility and it may turn out to be a nightmare. However, since you are reading this post, you are willing to take that extra currency risk.
There are various ways by which you can invest in international stocks, and it doesn’t require a minimum ticket size; you can invest in international equity with $1 also!!! Nevertheless, there is a maximum limit of $250,000 (₹1.8 crores) as stated by RBI under Liberalised Remittance Scheme (LRS). Coming to the most important question now, HOW?
- Indian Brokers: Popular Indian Brokers like HDFC Securities, Axis Securities, ICICI Direct, Kotak Securities, etc. have tie up with foreign brokers and offer Indian clients access to international stock markets. They may charge some extra fees or premium or brokerage for international equities, and hence one must go through the terms and conditions very carefully before proceeding. We don’t advise retail investors to use this method, as the costs involved under it may outnumber the returns. It is suitable for people who want to invest large corpus in international equity and have the requisite expertise.
- Foreign Brokers: There are few international brokers, which have branches in India and give their client an option to invest in foreign market. Some of them are Interactive Brokers, TD Ameritrade, Charles Schwab, etc. These brokers are generally expensive and require a minimum amount in the investment account of the client. This option is suitable for fund managers and full time active traders.
- Startup Apps: Exploiting the opportunity and interest of Indian investors, many new age startups have come with apps to provide access to international stock markets. Vested Finance and Webull App provides easy access to foreign equities. Although they are regulated and registered, their recency creates a risk factor. Hence, it is advisable to not put a large sum of money through these apps. They can be used for small investments, to just get a taste of international markets.
- Mutual Funds: There are many Indian Mutual Fund Houses that offer dedicated mutual funds for international stocks. You can easily invest in them and get exposure to international equity. Some of these funds are: Aditya Birla Sun Life International Equity, DSP Global Allocation Fund, ICICI Pru Global Stable Equity Fund, etc. This is the best option for retail investors to get international exposure. Low cost of investing (no currency conversion and transfer charges) along with minimum risk (presence of a dedicated fund manager), makes this a popular option amongst retail investors.
So, next time when you tune into your Apple Smartphone with Coca Cola Can in your other hand, you are actually creating money for yourself.
Do share with your friend who wanted to invest in Google! #rare4share
Safe Harbour: This post is for education and awareness purpose only!