A 1000 Dollars invested in Netflix 10 years ago would be worth approximately 75,000 Dollars today. And that’s just Netflix. There are many other companies such as Amazon, Apple & Facebook who’s products and services we use on a daily basis and would like to own in our stock portfolio. Some of these companies have given spectacular returns even in times when Indian markets have performed poorly.
Why Invest Outside India?
While the Indian economy has been amongst the fastest growing economies during the last decade, the stock market performance is subject to various factors. These include interest rates, investments by foreign funds, the prevailing political situation etc. Geographical diversification helps mitigate risks emerging from any of these factors.
Options available: Direct vs Indirect
1) Directly through a broker: There are a handful of brokers in India who have tie-ups with international brokerages. Investments can be routed via some of these brokers. (ICICI Securities, Kotak Securities etc.) The other option is to open a brokerage account with an American company (Ameritrade in the US for e.g.). and transfer the funds to an account in the US. While this option offers flexibility in terms of choosing what stocks you want to invest in, it involves additional paperwork, higher charges and certain minimum amounts to open these accounts.
2) Indirect: Through a fund. This is an inexpensive and extremely easy option for new investors to gain exposure to international stocks. There are various Indian Mutual Fund companies which offer funds that either invest directly in international stocks or purchase other international funds.
Two popular options below and their top 5 holdings:
1) ICICI Prudential US Bluechip Equity Fund– Amazon Inc, Comcast Corporation, CVS Health Corporation, Mondelez International, Pepsico Inc.
Annual return for the last 3 years ~12%. (More Details)
2) Motilal Oswal Nasdaq 100 Exchange Traded Fund-Apple Inc, Microsoft Corporation, Amazon Inc, Alphabet Inc Class C, Facebook Co.
Annual return for the last 3 years ~ 14%. (More Details)
Some other international fund options for Indian investors:
1) DSP US Flexible Equity Fund
Parag Parikh Long-Term Equity Fund– A Mix of Indian and International Stocks.
Another fund which invests in international stocks is Parag Parikh Long Term, Equity Fund. It has a 3 yr annual return of 10% and a 5-year annual return of 16%. It invests up to 35% of the fund in international stocks and the balance in Indian stocks. Hence it provides a good mix of Indian and International stocks. (More Details)
Diversification of a portfolio definitely helps mitigate risks associated with a single country or market. For any investor just starting out, buying a fund that invests in International stocks is a cheaper and more accessible way to own these stocks.
Disclaimer: All stock/fund returns and holdings are as of the