Diversification is crucial to reduce investment risk and ensure stable returns. Indian investors today can easily access both domestic and international markets—here’s how to build a globally diversified portfolio.
1. Why Diversify Internationally?
Domestic markets may underperform due to local events. Global diversification reduces reliance on one economy and opens doors to sectors not well represented in India (e.g., tech giants, pharmaceuticals).
2. Access to Global Markets
- International Mutual Funds: Funds of funds investing in global indices like S&P 500, Nasdaq.
- ETFs: Listed on NSE/BSE, they mimic global indices.
- LRS Route: Under RBI’s Liberalized Remittance Scheme, Indians can directly invest up to $250,000 abroad annually.
3. Choosing Between Emerging and Developed Markets
- Developed Markets (US, Europe): Stability, strong governance, and tech-heavy growth.
- Emerging Markets (Brazil, Vietnam): Higher risk, but potential for rapid growth.
Balanced Approach: 70% developed, 30% emerging for moderate risk appetite.
4. Currency and Tax Considerations
Returns from global investments are affected by INR-USD rates. Taxation differs for global mutual funds (as debt funds in India).
5. Tools for Diversification
- ICICI Global Advantage Fund
- Motilal Oswal Nasdaq ETF
- Vested, INDMoney (for direct US stocks)
Conclusion
A globally diversified portfolio protects against country-specific risks and taps into worldwide growth. Start small, understand the risks, and gradually build exposure based on your goals.