Investing In Foreign Stocks (Part I)

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Investing In Foreign Stocks (Part I)
Deepika Asthana - 07 December 2019

Overseas stock markets can offer domestic investors compelling investment opportunities. Additionally, foreign investments also help portfolios reach optimal diversification by including assets that might have low to negative correlation with domestic stocks. Indians looking to invest in foreign stocks can do so in any of the following ways:

  1. Open an account with an Indian broker having a tie-up with a foreign broker – There are many full-service brokers in India that have a tie-up with foreign brokers. In order to directly trade in foreign securities, these domestic brokers can help you open your overseas trading account with their partner (foreign) brokers.

  2. Open an account with a foreign broker – There is also an option to directly open an account with the foreign brokerage firm. There are a few international brokerage firms like Interactive Brokers, TD Ameritrade, Charles Schwab International Account etc. that provide Indian citizens the facility of setting up trading accounts. Once your trading account is set up with the foreign broker you can easily trade in foreign stocks, mutual funds etc.

  3. Buy and Indian MF/ETFs having a mandate to invest in global equities – This really is the simplest and the best way for a retail investor to gain exposure to foreign stocks. There are a number of mutual funds/ETFs that have launched schemes that invest in international markets. You can buy units of such funds in the same way as you would buy other mutual fund units, and this simple process will give you the desired exposure to foreign stocks. This route precludes the need for you to open a trading account with a foreign broker. Additionally, the amount that you invest can be as small or as large as you like. This can be detrimental since in direct investing the brokers can often ask you to maintain a minimum balance/deposit (which can be as high as $10,000).

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