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S Ravi

The author is a practising chartered accountant and an independent director on many large public companies whose views and ideas have been instrumental in framing policy

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BW Businessworld

How To Invest In Foreign Stocks

Investors can also look at global indices; overseas index funds can provide good opportunity for investors. Investors must certainly evaluate the return given by domestic indices as compared to foreign indices. The investor may also decide to diversity to mitigate risks.

Photo Credit : Shutterstock

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Investments can be made in foreign stocks adopting various methods like fund of funds, mutual’s funds with global stocks, index funds, ETF or direct equity. Any investor must choose the
type of investment based on investment limit, holding period and the tax structure. It is important to research both the macro and micro economics before investments are made. In case of investments in fund of funds investors can choose to invest without any remittance as they can use an Indian vehicle. Investments can be made mutual which has a scheme where investments are made in foreign stocks.

However it is important to assess the performance of the fund and select the right fund house and also the apt scheme. The investor can also opt for a scheme which has mix of domestic and international stocks. In case of direct investments, it is important to research or take prudent advise. There are select brokers who facilitate buying and selling of foreign stocks. Cross border transactions certainly require to factor country risks and foreign exchange fluctuations. Direct investment may turn out to be more expensive than other modes of investment due to multiplicity of factors.

Investors can also look at global indices; overseas index funds can provide good opportunity for investors. Investors must certainly evaluate the return given by domestic indices as compared to foreign indices. The investor may also decide to diversity to mitigate risks.

Another aspect which needs  to be considered is the tax implication in form of long term capital gain. The overall return will be impacted as tax rates are significant and holding period is determined by tax rates. Similarity dividend are taxed at the hands of shareholders. Investors intending to invest  in foreign stocks would certainly look at factors like hedging against domestic uncertainty if any and also to diversify the portfolio and risk. The concept of investing in foreign stock is on the rise through the domestic market in stock and providing good returns. Awareness of global trends and stock movement is another factor which is enabling investors to look at global stocks.

S Ravi, Former Chairman , Bombay Stock Exchange, Founder & Managing Partner of Ravi Rajan & Co.


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