How to invest globally in the current economic climate?
Put all your eggs in one basket, nobody says. The basket, in this case, is the internal market. And looking at the trends in India, it can be safely said that no one who wants to earn interest on investments limits their investments to the domestic market. Since it is very unlikely that all currencies will appreciate or depreciate at the same time, diversifying your portfolio is a smart decision. Appetite for international investment is growing among Indian investors as old barriers are being swept away. This can be attributed to relentless disruption across all sectors and an unprecedented pace of change due to a global pandemic.
But economic discussions cannot take place without assessing the situation in developed markets like the United States. After the 2008 financial crisis and the COVID-19 pandemic, the Federal Reserve followed a liberal monetary policy by injecting a lot of liquidity into the market. While this offered temporary relief to an immediate crisis, it raised concerns about inflation, which the FRS is trying to address by tightening monetary policy with an increase in interest rates. A higher national debt at higher interest rates could be a long-term concern for the United States, financial experts say.
Morgan Stanley’s research report indicates that, unlike US stocks, European and Japanese stock markets are more reasonably priced and growth-oriented. With businesses reopening and equity returns improving, the Japanese stock market is expected to appreciate 12% next year. Financial strategists believe that healthcare, finance and secure technology companies could see a rise in the coming year.
The average assets under management (AAUM) of the Indian mutual fund industry for the month of February 2022 stood at Rs. 38,56,140 crores.
Household preference for mutual funds over other investment avenues has been on the rise since 2016. Since investing in capital market instruments involves risk and individual investors often lack Expertise in portfolio construction, security selection and market timing, mutual funds are ideal for pooling money from a wide range of investors and diversifying risk. These investments are actively managed by professional portfolio managers who undertake strategic transactions to take advantage of current or expected market conditions. In the process, mutual funds provide a steady stream of income and capital appreciation as well as tax benefits to otherwise risk-averse investors.
Impact of the latest developments
The recent industry-wide limit of $7 billion for Indian asset management companies investing in foreign securities and mutual funds means that Indian investors will not be able to make new investments in mutual funds Indian investment companies investing in global equities. The main reason for this is to improve the quality of disclosure regarding plan risk, performance and portfolio. The new reforms will bring key changes to the existing system, which will affect both investors and brokers, making margin laws stricter.
But that doesn’t mean Indians can’t diversify their portfolio of wealth by investing in international stocks. One can still invest in stocks of US companies directly through global investment platforms like Stockal, which help investors who want to expand their portfolio of wealth globally. Many people don’t have the benefit of knowing a particular company or want to invest without a “maintenance” amount and are looking for profitable options. So if you’re not a pro or don’t have the expertise to pick the right stocks, ETFs are your best bet.
How are ETFs different from mutual funds?
Exchange-traded funds are a certain type of common investment securities similar to mutual funds. These work just like mutual funds, but are traded like stocks on US exchanges with real-time prices. To build a diversified portfolio, ETFs are ideal because their expense ratio is lower than that of actively managed mutual funds.
Take a look at some of the popular funds on Stockal’s platform for global investors looking to geographically diversify their portfolios.
Most ETFs generated returns that significantly exceeded the returns of the S&P 500 and Nasdaq Composite indices for 2021. For a detailed understanding of the performance of US markets in 2021, Click here.
Ideal course for investors
The option of investing directly in foreign markets through domestic platforms remains viable. Indian residents can send up to $250,000 per year per person under the Liberalized Remittances Program (LRS). Investing in stocks or ETFs available on US exchanges is a good idea if you want to invest directly in US stock markets. Since in the case of stocks, fractional investing is allowed in the United States, Indian investors can invest in high-priced stocks for as little as $1.
Another method of investing is Stacks – curated by asset managers, financial specialists and investment experts. Global investment platforms like Stockal have a set of curated portfolios called Stacks that are developed by hedge funds, global asset management firms, experienced wealth management firms, and portfolio managers. You can choose the stack that best suits your investment model.
Benefits of stockpiles
1. You can diversify your holdings with just one click, without going into extensive research.
2. They are built by investment experts based on extensive research and financial analysis.
3. Active quarterly rebalancing is performed to ensure alignment with goals and benchmarks.
4. Each stack has a pre-assessed risk appetite based on the portfolio of stocks or ETFs the stack has to offer.
All Stockal stacks are pre-configured and you can invest in them with just one click. Some of the popular stacks are:
1. US Tech Chip Portfolio
Pure Technology Internet companies that are essential to the industry and have leading competitive advantages (MOAT) in their business.
2. Electric vehicle portfolio
Comprised of companies involved in electric vehicle (EV) technology, autonomous vehicles, batteries, EV components, and general cleantech companies. This stack focuses only on investing in electric vehicle businesses with high growth potential and moderately low risk.
3. Omniscience Supreme US
AIoT Stack is at the heart of disruptive technological infrastructures (AI, IoT, Cloud, 5G, Big Data, Robotics, Analytics, Cybersecurity, etc.) and their use cases (Industry 4.0, Autonomous cars, Virtual reality, Smart Wearables, etc.).
Want to learn more about Stockal’s Organized Stacks? Click here
Given the latest changes to rules and regulations, it’s safe to say that there may be more in the near future. To continue investing globally, the best way to go is to opt for stocks and exchange-traded funds, as these do not attract exit charges and expense ratios.
Although the market may remain under pressure, global investment options remain a possibility for investors. International investment is taking advantage of the growth potential of emerging markets. When it comes to stock markets, volatility is a given, which means it’s best not to make all your investments in one particular region. A globally diversified wealth portfolio helps investors take advantage of market cycles in different countries and manage the risk associated with them. So when investing globally is simple and easy, why not start now?