Indian investors often face limited investment opportunities, typically restricted to domestic firms. However, investment experts suggest exploring international investments to diversify portfolios and gain exposure to global markets. So what are the Investment Options for Indians apart from domestic markets? Let us see in this article.
The Reserve Bank of India’s Liberalized Remittance Scheme enables individuals to invest up to $250,000 in foreign markets, providing an opportunity to expand wealth and knowledge of global markets.
Investing in an international portfolio offers access to a wide range of equities and other capital assets, focused on global markets, rather than just local ones. A carefully designed portfolio can provide exposure to both developed and emerging markets, allowing for diversification.
As global economies begin to recover from the pandemic-induced economic crisis, new investment opportunities are emerging for Indian investors interested in international investments. Long-term investors or those planning for future expenses such as international travel, education, or retirement may consider offshore assets to mitigate the risk of depreciation in the value of the Indian rupee.
In this article, we will delve into the advantages of investing in international opportunities and discuss various alternative investment options that can help individuals save money from salary while expanding their wealth.
Foreign portfolio investment provides investors with opportunities to diversify their existing investments on a global scale. This diversification enables investors to access new markets and increase the potential for risk-adjusted returns within their investment portfolio.
Investing globally provides an additional advantage of safeguarding investments against fraudulent activities and liquidations. Established companies in developed markets are usually subjected to rigorous regulations and stringent penalties for market manipulation, promoting sound corporate governance. This protects retail investors from potential scams and insider trading losses.
Although there is always a certain level of risk involved, foreign financial institutions offer protection from threats such as broker-dealer liquidation and seizures, minimizing potential losses for investors.
When investing in an international portfolio, purchasing shares in foreign stocks also involves acquiring the respective currencies associated with those stocks. As a result, if the value of a particular foreign currency decreases, your portfolio’s investments in other countries may help offset such common fluctuations.
If Indian individuals are hesitant to invest directly in foreign entity shares, they may want to consider international mutual fund schemes that offer exposure to global markets and foreign equities. Additionally, there are numerous foreign exchange-traded funds that provide access to critical global indexes, such as the NASDAQ. These investments would fall under the total LRS (Liberalised Remittance Scheme) limit and would not require reporting under the new regulations.
Resident Indians are permitted to invest in shares of international corporations listed on overseas stock markets with holdings of less than 10%, without gaining control over the foreign company where the investment is made. To facilitate these investments, Indian residents can establish an offshore trading account with an Indian brokerage firm that collaborates with a global broker. Alternatively, they can also open an account directly with a foreign broker that has a presence in India, such as Charles Schwab, Ameritrade, Interactive Brokers, and others.
Investors also have the option of investing in shares of publicly traded companies in the United States through Indian brokers who facilitate direct investment in US equities while charging a fee. However, investing directly in foreign shares requires the same level of diligence, if not more, as it involves a cross-border investment. Moreover, direct investment in foreign equities may be more costly compared to investing in mutual funds or exchange-traded funds.
The permissibility of investing in real estate in a particular location depends on the applicable laws and policies. However, compared to other investment options, purchasing property abroad often requires a larger amount of capital. Additionally, it’s important to note that real estate investments tend to have lower liquidity regardless of the location of the investment.
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Indian citizens seeking a reliable source of income from foreign markets have the option to invest in listed bonds issued by foreign governments or listed corporate bonds issued by foreign companies. Such investments in listed Debt Products would be subject to the LRS limit, and would not require additional reporting under the new framework, similar to investments in overseas stocks and listed debt securities.
Alternative investments offer Indians the opportunity to grow and protect their wealth far more efficiently than traditional investments. With a little research and due diligence, you can find the right alternative investment options for your needs.
Talk to your financial advisor if you are unsure about how to start building a portfolio that works for you. And never forget to have a clear understanding of the risks associated with any type of investment before committing.
So take action today and start growing your wealth portfolio with alternative investments!
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