Introduction
To diversify their portfolio, Indian traders find investing international investments an excellent choice. They use their smart trading tricks and skills to make profits that help them double their trading potential.
Investing international investing has become a part of the Indian market now. But, beginners are not aware of how to do this smoothly. So, to support them on how they can invest internationally from India, here’s a brief guide.
Why Invest Internationally?
When the word international trading comes, many think of US stocks. It is so because the stocks expose traders to the whole world—many companies related to the US market are listed there.
Although, these might be working globally. Thus, traders get a good chance to diversify their portfolios. They trade in US stocks through indices, mutual funds or ETFs.
Moreover, the currency value of US stocks is more than that of the Indian rupee. Which makes it a stable market compared to the Indian market. Therefore, selecting the US market or international investing is a profitable option in long-term trading.
Also, the international markets outperform domestic markets. Thus, the chances of making money are higher there. Considering these points, it becomes easy to understand why Indian traders prefer investing internationally.
How to invest internationally?
International market trading is an attraction for many Indian investors. But, few experts know how to do it perfectly. So, to guide Indian investors, below we have the three significant ways of foreign trading.
- Trading via mutual funds
- Investing in Exchange-Traded Funds (ETFs)
- Direct Investments
Mutual Funds
Mutual funds are a good option for Indian traders to invest indirectly. They can trade internationally without depositing funds or looking for the best deals.
The investment has a portfolio of stocks, bonds and many other securities. The securities are managed under the supervision of a professional money manager.
He works to allocate the funds for the assets.
The motive of the trade is to produce capital gains for the investors. There is a pool of funds for similar assets that the manager invests in the international market.
The Indian traders have proportionate participation in the gains and losses of the investment.
Exchange-Traded Funds (ETFs)
Exchange-traded funds, known as ETFs in regular market terms, are indirect investments. It is different from mutual funds and operates uniquely.
The ETFs are available with brokers of the market. Traders can invest in these in domestic and international markets. In addition, they can open their account with brokers that provide international trading.
After which, they can invest in the ETFs accessible online. While they can also trade indirectly through stock exchanges. Traders can buy units of ETFs they want without any restriction.
They track indices and can buy ETF shares. For example, traders can go for US stocks by ETFs. They can purchase it from local or international brokers. Besides, they can buy Indian ETFs with international indices.
The indirect investments have no paperwork and minimum deposits. In addition, it is commission-free trading. Traders can open their account by providing their:
- Pan card number and copy
- Proof of address
Direct Investments
Direct investment in US stocks or other international investments requires a brokerage account. The broker can be in India or abroad, whichever method the trader finds suitable.
Indian brokers act as an intermediary between the trader and foreign market brokers. Traders can invest through these and open an overseas brokerage account. Or they can open their account with a foreign broker working in India.
Traders can invest in the international market using these two ways. Both have their pros and cons. However, traders can compare the commission, trading fees, facilities, research tools and other factors.
The traders should also be aware of the investment limit of the RBI. Indian traders can invest no more than $250000 (1.9 crores) in the international market within a year.
Learn more about on What is Spot Trading ?
Conclusion
Beginners can trade in international markets with ease. The process of trading is simple with direct and indirect investments. Besides, the profits from the market trading are double that of the Indian market.
Traders can benefit from geographical and currency diversification. Also, they get new opportunities to trade and earn.
Considering the points and why traders invest internationally. Beginners can easily trade in international markets. They can research and know the process of trading. However, they should analyse the risks.
