Investing money in foreign countries is a new option for individual investors.Your investment objective must be clear if you want to invest abroad. ETFs and Mutual Funds are a convenient way to invest internationally.
We believe that allocating in between 5% to 25% of your total portfolio as an international investment can be a smart move for numerous reasons:
- Higher rates of growth abroad.
- International stocks have become a larger share of the investment world.
- Potential to reduce overall risk in your investment portfolio.
- Multiple currencies offer an added layer of diversification.
How to Invest Internationally:
Assuming that you have a surplus amount of funds to risk the money that you have, in investments abroad, you must have knowledge about specific investment instruments and the current market conditions in your desired country where you want to invest. You must also consider the fluctuating currency value.
Invest in equity market abroad
Many Indian stock brokers have collaborated with a lot of foreign brokers for making an investment in international equity markets hassle-free. You can create an overseas investment or trading account with the help of a qualified broker by submitting the necessary documents such as the application form along with your KYC documents, requisite documents for LRS declaration, Form A2 for remittances covering intermediary trade, FEMA declaration form, and authorization form for banks to act as your intermediary.
Investing in overseas realty market:
Under the LRS, there are restrictions on withdrawals of $250,000 per annum for individuals wishing to invest. This amount may not be enough to invest in some international realty markets. However, if you include any of your family members to your plan, your limit could be raised to $500,000 and invest in realty abroad. You can also borrow money from banks as a Bank Loan to support your purchase. If the lending bank is local, you will get tax advantages similar to those while buying property in India. It’s very important to assess your risks and be prepared since housing markets in countries like the US and UK have seen extreme volatility in the past.
Other Investment Opportunities:
There are some other investment opportunities also where you can invest, such as Real Estate Investment Trusts (REITs), and investment in renewable energy assets are popular among HNIs or the High Net worth Individuals. Such instruments allow the High Net worth Individuals to diversify their investment portfolio and hedge their currency risk as per their desired requirements. HNIs also make investments in foreign companies via private equity through international investment bankers and consultants while adhering to the RBIs guidelines and FEMA.
There are vast opportunities available internationally for the intrepid investor. Some of these options are open to all and not restricted to HNIs. Each individual can invest as per his capacity and risk-bearing capacity. If you are interested to explore these options, then it’s better to start your research about your investment opportunities, currency risks, and local investment laws. You can also take the support of investment advisors to zero in on the best investment products for you.