Although the market capitalization of the Indian stock markets has crossed $2.5 Trillion, it is less than 3% of the total global market cap. Indian markets are largely limited to Indian companies and do not give access to many investment opportunities available abroad. These opportunities include companies that benefit from global growth, such as the popular FAANG stocks (Facebook, Amazon Apple, Netflix, and Google, now known as Alphabet), and innovative themes like artificial intelligence, biotech, and clean energy that may not be available to invest in India.
Further, investing in only domestic markets raises one’s concentration risk. It does not result in a geographically diversified portfolio and increases the risk of the adverse impact of isolated shocks. Investing in global markets that may have a lower correlation with the home market typically leads to better risk-adjusted returns over the long run.
Although historically, investing abroad or in the US stock market has been a complicated process for Indian investors, things have changed in recent years. Ongoing technological innovation has made the process for Indian investors to invest in overseas markets much more straightforward.
One of the biggest pain points of opening an account with a financial institution used to be the amount of paperwork involved. Now, with the advent of digital onboarding processes where users can simply submit the necessary information online, cumbersome paper-based account-opening is a thing of the past. What is more, even the identity and address verification required for the Know-Your-Customer (KYC) process has become fully online; all that is required is a PAN Card and Address Proof to be uploaded.
Some banks in India offer digital funds transfer facilities to remit money overseas for investment purposes. This further reduces the paperwork involved and saves time as one does not need to visit the bank branch to transfer funds to a foreign brokerage account.
Investments can be completed online now, with digital platforms making transactions available at your fingertips. Platforms offer a range of research and analytics tools to aid the investment decision process, including company and fund-specific financial information, performance tracking, and news.
Fractional investing enables the purchase of a portion of a single share. With fractional investing, investors can divide investments among more stocks to achieve a more diversified portfolio, plan investments in dollars instead of several shares, and invest in stocks one wants, regardless of the share price.
Some companies also offer ready-made portfolios for customers to invest in. Built based on data-backed research and analysis by experts, these portfolios are ready-made baskets of stocks and/or ETFs that aim to simplify investment decisions. These portfolios are usually designed to achieve a specific investment objective, such as saving for a goal or gaining exposure to a specific theme or trend. They are regularly monitored and reviewed to ensure they continue to deliver the stated objectives. Customers can invest in these portfolios with a single click, making the investment process much simpler.
There has been a tremendous amount of progress in the recent past to make international investing a more straightforward process for Indians. This enables Indian investors to easily participate in international investing and build a diversified global wealth portfolio.
A version of this article was published on CNBC TV18.
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