ARTI ARORA CFP CM | HEAD FINANCIAL PLANNER
There is a definite change in investor perception with respect to investing across geographies when we compare today's times with that of what it was about a decade back. In the year 2008 after the sub-prime crisis, Indian markets took a hit too but were a preferred investment destination vis-à-vis their global counterparts. Come to the year 2020, that comfort zone is fast changing and there is an increased level of interest in international markets. This interest is fuelled by quite a few factors, the performance of the international markets especially the US markets holds dominance here.
From local, we want to go global and diversify our investments beyond the usual asset classes, sectors and strategies to geographies.
While there are investment opportunities that still exist locally and plenty of them, the investor perception and bias towards a more global portfolio is for obvious reasons. A lot has happened over the last 18 months because of Covid and there is a genuine investor interest in exploring and evaluating the risks and returns in the investment opportunities available in the global domain. This interest was there earlier too but is getting more rational and well found now.
There are many broker and adviser portals in India that have tied up with different investment platforms to make global investing very accessible and affordable.
The S&P 500 (US Market Index) has fared rather well the last few years and to some extent even beaten returns from Nifty (Indian Market Index).
Indian equities have also been more volatile and investors looking for a more stable and settled portfolio are intrigued by the opportunities abroad. One wants to create wealth and see their portfolio growing at all times irrespective of what the local conditions may be. In their endeavour to optimize returns and minimize risk, they look for greener pastures which to some extent investing in developed markets as the US does warrant.
Apart from this, rupee depreciation against dollar and increasing popularity of the international brands amongst the Indian consumers too has evoked this interest in foreign equity.
Today, almost every urban household subscribes to Netflix, owns an Apple Phone or some other gadget, orders from Amazon, uses google and of course has a facebook account and when given an opportunity to invest in these global brands, the interest and curiosity is only natural. These brands and their products have become a part of our daily lives and we do see a higher growth potential in them and thus the shift especially for the millennial who give higher weightage to returns than risk.
There are quite a few Indian mutual funds that are investing in the international markets and taking exposure in their equities. When you study the portfolio holdings of these funds, you do see a percentage of the total assets under management (AUM) invested in Microsoft, Alphabet, Apple and other such companies which does augur well for the investor in terms of returns as well as diversification.
To summarise the above, diversification at all levels is good and that holds true for diversifying across markets and geographies too but it has be based on strong research and potent advisory as otherwise the risks involved in international investing can far supersede the returns.
Safety of one's investment is paramount and so never invest because a friend or a relative did and made returns. Going global with your investments is a good idea but the form of investing, legalities involved, ownership of investment units, redemption rules, taxability, review advise, etc should be crystal clear in your mind as you make the move.