International investing has become an essential part of the portfolio. Adding international funds/stock provides diversification to the portfolio and helps capture the returns from the growing stock market worldwide.
Benefits of International Investing
1. Diversification
One of the apparent reasons for investing globally is the diversification of the portfolio. When you invest globally, the investment correlation reduces in the portfolio. In simple words, the dependency on the returns on one market reduces.
Many US-listed companies have operations and revenues at a global level, and these companies are market leaders worldwide. Investing in these companies could provide good exposure to the portfolio.
2. Currency hedge
Investing overseas will help your portfolio hedge against the depreciating currency. For example, INR against the US Dollar has depreciated by 3.5-5% over the last few years.
Another reason for investing globally could be if you are planning to send your child for higher education abroad, you should always consider investing in the international market to hedge your portfolio against currency appreciation or depreciation.
Investing in the global market protects the portfolio from currency depreciation.
Additional read: What are international funds?
3. Opportunity
Investment opportunity at the global level is immense and can be grabbed only through investing internationally. Economics doesn’t grow at the same time and at the same pace.
Still, if any economy is growing at a faster rate, then investors could benefit from these growing economies by investing directly or through international funds.
Investing globally opens many gates; you can choose from various themes and sectors to invest in and even choose the region for investing.
As for technology, you can invest in the US market, and for Engineering, you can consider investing in the Europe market.
4. Fraction buying
Unlike in India, you can buy shares in a fraction of the US market. You can buy a fraction of a company’s share, trading at $2000.
Fractional buying makes the investment more affordable and accessible. So, if you have only Rs 1000/- to invest, you can do that easily.
For example, if you want to buy an Apple Inc. share which is currently valued at 160 USD, but you don’t have enough amount to buy one share of the company, then, in that case, you can buy a fraction of the company’s share with Rs 2500 also which will USD 30 approx.
5. Lower or managed risk
Investing in the international market help to reduce the risk of the portfolio. Every country has a different macro-economy and policies.
Developed countries relatively have low risk than developing economies. Spreading your investments in the developed economy could help you to generate better risk-adjusted returns.
Conclusion
Investing in the international market will help you diversify your portfolio and capture the new investment opportunity globally, but it also comes with risk factors. Always evaluate the risk-to-reward ratio before investing.
If you don’t know where to invest and how to invest, download the EduFund app for android and iOS and scheduled a call for free with the experts.
