Today the economy of nations have become interdependent. Globalization offers cross border investment. You also have the smart investment option to buy foreign markets equity for high returns. Today, we will see how you can invest in foreign markets without and earn good profits. Before going further, understand :
What are Foreign Stocks?
The shares of foreign companies, i.e, based out of India, are known as foreign stocks. There are some huge international firms that make a great investment option, similar to domestic blue-chip equities. When you choose to invest in these shares, they can balance the risk in your portfolio.
Similar to the domestic market, one way can be that instead of buying shares directly, we invest money in a mutual fund that has invested in that stock. But if we talk about expensive foreign stocks like Apple, Google, Amazon and Tesla, then what is the way of it? There are some stocks in the US stock market, whose price in Indian rupees is 1.5 to 2.5 lakhs or more. If you want to become a participant in these stocks, fractional investing is one such way, through which you can reap the benefits of these expensive shares. At present, the facility of fractional investing is being provided on many online advisory and investment platforms.
Here are three ways in which an Indian investor can invest in foreign shares.
- Foreign Ties–ups With Indian Funds
This is one of the easiest ways to invest in foreign shares. It allows investors to access foreign shares when it comes to investing in foreign equities without undergoing any tedious process. To find Indian fund houses that offer these opportunities, one can look for names such as Emerging Market or Europe Focus. These names suggest that these mutual funds have invested in foreign stocks through local markets. The movement of these shares can be tracked easily by looking at the NAV of the Mutual Funds purchased in India. These houses buy units in Mutual Funds International Stocks. With this, you can not only keep an eye on the economic changes in the international markets but you can also get feedback for the volatile performance in the Indian stock market.
- Direct investment
Another way to do foreign stock trading is to need to invest quite a lot more to invest directly in international money. According to the guidelines of the Liberalized Remittance Scheme (LRS) of RBI, a resident of India can invest up to $ 2.50 lakh every year in foreign markets. This can be done even without taking approval from RBI.
Although there is an annual cap on the total amount of money invested in any given year, there is no limit within the International Fund itself. You can easily open a trading account with an international broker. You do not need a native mailing address (at least in the US) to open an account with an international broker from the United States.
- Exchange-Traded fund
The third option for Foreign Shares Trading is to Invest in Exchange Traded Funds. On average, ETF prices fluctuate throughout the day. It is bought and sold all day. It is different from Mutual Funds which are sold or bought once per day after the market closes. To access these funds, you do not need to contact overseas markets. Indian brokers also provide exchange-traded funds as local market direct investment options.
Before investing, make sure that the ETF that you choose to invest in is registered with the Securities and Exchange Board of India. By investing in ETFs, you can reduce your training risk, because these funds to a larger extent simply repeat the movement of an index. In addition, the ETF’s expense ratio is quite low in comparison to mutual funds. To invest in ETFs, you need to have a brokerage account with an Indian company or international company. However, you do need to have access to these funds.