Smart investing in global markets is gaining popularity all over the world. With numerous investment options to choose from, people are investing to make their future better and stay ahead of inflation. However, you will have to make the right investment choices that meet your needs to help you attain your future financial plans. In this blog, we are going to discuss easy ways through which you can invest in foreign stocks. Additionally, we'll discuss the pros and cons of the same. Let's begin.
Smart, sustainable investment is the 'new normal'
Apple, Google, Meta, Amazon, Netflix, Microsoft, Samsung, Tesla, Twitter are some of the globally leading companies in the world. But did you know you can profit from their growth? Yes, it is possible! All you need to do is buy some shares of the company. In a nutshell, you will have to invest. And, these are just a few names. There are plenty of companies that you can benefit from without actually buying their products or services.
But these companies are listed on their country's stock exchanges, such as the US stock exchange. Then how do you buy shares in a company that is not registered in India but trades in foreign exchange?
Here are three easy investing options:
Direct investment- You can take advantage of digital platforms that allow you to invest directly in global markets. For smooth investment, you can try apps that have access to foreign stocks.
Multinational Corporations (MNCs)-Investors who do not want to buy foreign stock can directly find domestic companies that make up a significant portion of their earnings abroad.
Exchange-Traded Funds (ETFs)- Another convenient way to invest in overseas markets are ETFs. They are exposed to multiple foreign markets while others are country-focused. These funds cover a range of asset categorizations, such as market capitalization, geography, investment styles, and sectors.
Advantages of investing in foreign stocks
- Investing in global markets opens up a wide range of options for investment. There are currently many opportunities to invest in stocks from sectors that are not available on Indian stock exchanges. Also, payments can be made conveniently via UPI, Visa or MasterCard.
- Another salient benefit of global investment is growth. Your portfolio is expected to expand if you start investing in international stocks. Tip: The combination of Indian and international stocks will work best for you.
- By diversifying in different stocks globally, your profits ought to stay stable. The reason is, if you spread your investments across distinct geographic areas, there is little correlation between the them. It means that fluctuations in one market are unlikely to affect your other assets.
Disadvantages of investing in foreign stocks
- When you invest in international stocks, you are trading in foreign currencies. For example, if you are trading on the US stock exchange, you must pay brokerage fees in US dollars. So the transactional fees tend to be a bit higher.
- Whenever you invest in foreign markets, profits depend on the currency exchange rate. For example- You invested in US stocks, the currency exchange rate was $1= Rs 75. However, next year- when you sell shares, let's assume Indian currency gets high, and the currency exchange rate becomes $1 = Rs 70. Here, you'll have to face losses because of the currency fluctuation.
- There is a limit to investing. According to the liberalized remittance scheme (LRS), an Indian can send up to $ 250,000 a year overseas for travel, studies, and medical treatment. This rule applies to trading in the share market as well.
Financial advisers recommend holding at least a small number of foreign stocks in various portfolios. Investing in the international market might seem complex initially, but with relevant knowledge, you'll be able to do wonders. For starters, invest a small amount of money. Make sure you do your research carefully, understand the process of foreign investments, and choose options wisely.