Building a Global Portfolio: Investing Beyond Indian Borders

Indian investors do not have to rely on the investment options available to them in their own country. The idea of global investing has become more realistic than ever before.

Indian stocks and mutual funds were the mainstay of most investors in the past. Although India is a strong economy, it is also true that investing in one economy can be risky. Diversifying your investments by investing in another economy can be an advantage.

This blog discusses the reasons why it is necessary to make investments outside India, how exposure to international markets can be an advantage, and how one can start working on an international portfolio.

Why Diversification Is Needed?

Putting all your investment eggs in one basket, or in other words, investing in one country only, may result in hindrances in growth and may even be risky. Here are some key reasons why investing in India alone may not be a good idea.

• Currency Risk: If your future plans include travelling to other countries, higher education abroad, buying international assets, or retiring in foreign countries, your expenses may be in dollars or euros. A falling rupee may make your future plans very expensive.
• Concentration Risk: Being dependent solely on Indian markets means that your investments are tied to the performance of one economy. This implies that your investments are susceptible to the economic cycles of one economy. If India is experiencing a slowdown, it may impact your investments.
• Missed Global Opportunities: Some of the most innovative and rapidly growing companies in the world are not based in India. Some of the leading companies in their respective sectors, such as Microsoft and Apple, are listed on foreign exchanges. If you are investing solely in the Indian market, you could be missing out on the global opportunities.

Easy Ways to Invest Globally

Investing outside of India has become easy and accessible. Here are a few ways to start investing easily:

International Mutual Funds:

Several Indian AMCs have global funds that invest in the US, European, or emerging markets. You can begin investing in an international mutual fund, such as an S&P 500 index fund, with a SIP and a small monthly investment.

International ETFs:

You can invest in exchange-traded funds that are listed on the Indian exchanges and track global indices.

Direct International Investing (LRS Route):

Indian residents can invest directly in foreign stocks through the Liberalised Remittance Scheme (LRS). But this route demands more research and understanding of the compliance requirements.

Fund of Funds (FoFs):

There are many Indian funds invested in foreign funds. These FoFs are managed by Indian fund managers. This makes international exposure very accessible to individual investors.

How Much to Invest Globally?

Most financial experts suggest that investors should dedicate 10 per cent to 20 per cent of their total equity portfolio to international markets because no universal guideline exists for global investments. However, this is not a fixed per cent. Your investment amount should be determined by your risk tolerance, investment goals and investment period.

Global investments serve as valuable supplements to your investment portfolio if you maintain a long-term investment period of five to ten years or beyond. Global markets exhibit volatile behavior which you must consider when making short-term investments.

Conclusion

An international investment portfolio does not serve as a replacement for Indian investment options. It acts as an addition to existing Indian investment options. You can create a strong portfolio by using an S&P 500 index fund or a global fund to achieve risk diversification and benefit from worldwide economic expansion.

Successful investing depends on achieving equilibrium between different nations instead of showing a preference for one country. A balanced portfolio with both Indian and global investments can help you reach closer to your financial goals with more conviction.