As an investor, just think about the goods & services that we use in our day-to-day life. It could range from ordering food online, watching movies on Netflix, placing orders for an eBook on Amazon or even searching something on Google. Many of these companies have their base outside the country and are not listed in Indian stock exchanges.
Why Global?
The benefits from international diversification were empirically demonstrated in financial literature. These empiric have shown that by diversifying across nations whose market cycles were not perfectly correlated, investors could lower the risk of their portfolio returns at the given level of expected return. The top performing companies keep on changing every year. Thus, it does not make sense to concentrate to mare all your investments in a particular asset class. Another reason is to take advantage of the depreciating currency. So, it is a good idea to have a globally diversified portfolio.
To invest in the shares of international companies, as an investor you need to open a separate demat and trading account with a recognized and authorized broking house. Directly investing in overseas shares involve significant amount of research and the right mindset. At the same time, one could also go for Exchange Traded Funds (ETF). Such funds normally track an index and there are a few Indian fund houses that already have ETF based on international indices such Nasdaq and S&P 100. For investing in such funds, you can use your existing demat and trading account. This is probably the easiest way for investor to have an international exposure.
For instance, a popular fund house offers indeed funds which track the US S&P 500 and Nasdaq 100 indices. To invest in such funds, there is no need to have any separate trading account. Investor can invest in these funds like any other typical mutual fund either directly or through distributor. Some investors may have views against global diversification arguing that everything is so interconnected today that overseas investment may simply overlap domestic ones but that is not the case as companies tend to act in ways that means according to the situation in their country of domicile. They tend to respond to local economic and geopolitical events more than events outside their borders.
To conclude, it is prudent for investor to branch out globally and international diversification definitely helps in managing risk and positioning your portfolio for long-term growth.
Why Global?
The benefits from international diversification were empirically demonstrated in financial literature. These empiric have shown that by diversifying across nations whose market cycles were not perfectly correlated, investors could lower the risk of their portfolio returns at the given level of expected return. The top performing companies keep on changing every year. Thus, it does not make sense to concentrate to mare all your investments in a particular asset class. Another reason is to take advantage of the depreciating currency. So, it is a good idea to have a globally diversified portfolio.
To invest in the shares of international companies, as an investor you need to open a separate demat and trading account with a recognized and authorized broking house. Directly investing in overseas shares involve significant amount of research and the right mindset. At the same time, one could also go for Exchange Traded Funds (ETF). Such funds normally track an index and there are a few Indian fund houses that already have ETF based on international indices such Nasdaq and S&P 100. For investing in such funds, you can use your existing demat and trading account. This is probably the easiest way for investor to have an international exposure.
For instance, a popular fund house offers indeed funds which track the US S&P 500 and Nasdaq 100 indices. To invest in such funds, there is no need to have any separate trading account. Investor can invest in these funds like any other typical mutual fund either directly or through distributor. Some investors may have views against global diversification arguing that everything is so interconnected today that overseas investment may simply overlap domestic ones but that is not the case as companies tend to act in ways that means according to the situation in their country of domicile. They tend to respond to local economic and geopolitical events more than events outside their borders.
To conclude, it is prudent for investor to branch out globally and international diversification definitely helps in managing risk and positioning your portfolio for long-term growth.
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