Allocating money across different asset classes helps you improve your portfolio returns while reducing overall volatility.
Kumarpal Jain, AVP, Product – Fintso, says, “To create a portfolio that best suits their risk profile, an investor must understand the risk-return profile of different asset classes (such as equities, income fixed, global investments, gold, etc.) and create a portfolio with the right mix of assets.
Factors to Consider When Entering Global Markets
According to experts, globalization and large-scale digitalization offer immense investment opportunities in various geographies. “Global investments help to participate in the growth stories of innovators and global leaders who have the potential to generate higher risk-adjusted returns,” Jain points out.
However, global investing is associated with additional risk factors such as currency and country risks. Strong currency fluctuations can have a negative impact on returns.
Jain further explains, “Historically, the Indian Rupee has depreciated against major global currencies like the US Dollar, Euro, Pound, etc. Rupee depreciation increases the likelihood of earning higher returns on the wallet.”
The road and investment instruments
Industry experts say the Liberalized Rebate System (LRS) route is well suited for investors to start investing in international markets.
Jain says, “By depositing the money into his global account, investors can open up a plethora of investment opportunities in global stocks and exchange-traded funds (ETFs).
Another approach to investing in global markets, according to experts, is to use Indian mutual funds with a global investment mandate (offshore funds).
Direct Actions (Global)
Global stocks refer to a stock position in a company traded on stock exchanges outside of the home country. Experts suggest that investors should thoroughly research the business model, financials and growth potential while making direct equity investments in global companies.
Exchange Traded Funds (ETFs)
ETFs listed on the US market offer one of the best avenues for investing in the world, excluding the country of origin.
“A range of ETFs are available in the US market with different investment strategies, themes, country specific, etc. There are also actively managed ETFs where the fund manager looks for various aspects while making investment decisions. investment to build a portfolio.”
Offshore Funds (Indian Mutual Funds)
A more accessible approach to diversifying into global markets is to invest in offshore funds in India with an investment mandate to invest in international securities.
Jain explains, “Like all other mutual funds, SEBI also regulates the operation of offshore funds. Most offshore funds are managed as feeder funds, with an underlying fund being an offshore fund/ETF dedicated to a particular theme, strategy or country.
He adds: “Investors can choose from a variety of international funds based on their risk-return profile.