Dilshad Bilimoria
Non-Resident Indians (NRIs) want to tap into investment opportunities around the world and expand their options across geographies. India offers a wealth of investment opportunities, but expanding into international markets can increase your scope for diversification and reduce risk. This article introduces some intelligent investment options for NRIs, focusing on international funds of funds, exchange-traded funds (ETFs), direct equity investments, and the key concepts of diversification across global markets. Masu.
International funds of funds: a simple approach to global investing
For overseas Indians looking to invest internationally, international funds of funds provide an easy entry point. These funds act as feeders that pool your money with other funds and diversify your investments across different countries, sectors, and different types of assets. The main advantage of international funds of funds is their diversification and they are managed by professionals who adjust their portfolios to the movements of the world market. Additionally, Budget 2024 reduced the holding period for long-term capital gains from 26 months to 24 months and made the tax rate 12.50% + surcharge instead of the slab rate, making it more favorable to invest in FOF.
This passive approach frees overseas Indians from the need to constantly monitor and adjust their investments. However, it is important to realize that this ease comes at a higher cost in terms of expense ratios compared to direct investment. In addition, revenues may be affected by fluctuations in currency values, which may amplify or reduce profits based on the direction of exchange rates. International funds of funds are suitable for those who avoid the complexity of direct investing and prefer a professionally managed and diversified portfolio.
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ETFs: An affordable way to gain exposure around the world
Exchange-traded funds (ETFs) have emerged as a preferred investment option across the world and are a major attraction for overseas Indians seeking cost-effective access to international markets. ETFs are investment funds that track a specific benchmark, such as the S&P 500 or the MSCI World Index, and trade like stocks on an exchange. This feature allows investors to gain exposure to international markets without having to purchase foreign stocks directly.
The main advantage of ETFs is their low expense ratios compared to mutual funds, making them an attractive option for those looking to minimize costs. Additionally, ETFs provide liquidity and transparency, making it easy for overseas Indians to buy and sell on major stock exchanges. However, it is important to note that ETF performance is tied to the underlying index and is therefore susceptible to market fluctuations. Nevertheless, ETFs are positioned as a good option for overseas Indians seeking broad exposure to global markets due to their affordability and ease of trading.
Direct Equity: Building a Global Investment Portfolio
For overseas Indians with a high risk tolerance and a long-term perspective, direct investment in foreign companies can be a lucrative strategy. This involves acquiring shares in individual companies listed on international stock exchanges, allowing investors to participate in growth in sectors and regions that are not easily accessible through domestic investment, and to date You can benefit from asset classes, sectors, industries, and opportunities that are unique to you. Available in India.
Investing directly in stocks can provide great returns, especially in fast-growing industries and emerging countries. However, this method also comes with many risks. Stock markets are unpredictable and currency values can change, so thorough research and advice should accompany any investor decision. Additionally, the tax implications of investing in stocks in other countries can be complex and vary depending on the investor’s home country and the country in which the investment is made.
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The significance of global diversification
Global diversification is a key element of successful investing. NRIs can reduce the risk of putting all their eggs in one basket by diversifying their investments across different countries, sectors and asset types. This strategy not only reduces the impact of a recession in a single region, but also provides an opportunity to benefit from growth in other regions.
For NRIs, global diversification is especially important given the potential economic changes in their home countries. Although India’s economy is expanding strongly, it remains subject to local factors that can impact investment returns. By diversifying globally, NRIs can protect their portfolios from country-specific risks and increase their long-term growth potential.
Efficiency: Get the most out of your investment
Investment costs can significantly impact returns over time, especially for investors with a long-term perspective. Keeping these costs low is essential to maximizing returns, and this is where exchange-traded funds (ETFs) and index funds shine. Known for their low fees, these investment options are perfect for NRIs looking to reduce expenses and improve portfolio performance. Additionally, the availability of online platforms that offer low-cost or commission-free trading has made investing more accessible and economical around the world.
Investment theme: Riding global trends
Another strategy that NRIs can use to take advantage of global trends is theme-based investing. This strategy includes focusing on sectors and companies related to emerging trends such as renewable energy, technology, and healthcare. While this approach can lead to significant returns, it also comes with higher risks due to the concentrated nature of theme-based portfolios.
In conclusion, NRIs have a wide range of options to improve their investment portfolio by tapping into global markets. By carefully considering your risk tolerance, investment schedule, and financial goals, you can create a portfolio that aligns with your objectives. Global diversification is essential to successful investing, whether through international funds of funds, ETFs or direct equity investments. However, it is important for NRIs to do their research and seek advice from experts before making any investment decisions.
(Dilshad Billimoria is Founder, Managing Director and Chief Financial Planner at Dilzer Consultants Pvt Ltd. The views expressed are the author’s own and not necessarily those of Financialexpress.com. Before making any investment. Please consult a certified financial planner.)
