By Ashma Zaveri
Over the past year of the Coronavirus pandemic, more than 10 million new investors have joined the bandwagon of stock investing. Amidst extreme stock market volatility, which brought most bellwether and blue-chip stocks within the “affordable” price range, millennials were seeing lapping up the heavyweights like never before, along with other smaller stocks with strong fundamentals and antecedents.
Also, with the new-age digital broking platforms making global portfolio diversification easier and seamless, young investors have been investing heavily in global stock markets as well. More and more young retail investors are buying top global stocks like Google, Amazon, Facebook, Apple, Tesla etc., with the hopes of getting better returns by investing in large markets like the US.
Here are some important dos and don’ts for all new investors to follow for global investing in order to ensure they are able to invest with ease and with utmost safety and also remain within the stipulated norms and regulations.
Valid KYC details
For investing in overseas markets, a separate account needs to be first opened with a brokerage firm providing overseas investment services. Best brokers provide a completely digital onboarding experience for account opening. While the account can be opened with zero paperwork, investors will still need to furnish valid proofs, which includes a photo identification proof and an address proof, for registering their KYC (know-your-customer) details with the broker.
Any government-issued photo identification (ID), voter ID with photo or PAN card, valid driver’s license, passport or voter registration card can be used for ID proof and even for address proof, if the permanent address is the same as the current residential address. Otherwise, any utility bill, mobile phone bill or even the bank or credit card statement can be used for address proof, provided the supporting documents are of current period, i.e. not more than three months old.
After opening the account, investors can start investing abroad by adding funds to their brokerage account. However, before doing it, they must first carefully understand the government’s remittance rules for overseas investing.
Under the Reserve Bank of India’s Liberalized Remittance Scheme (LRS), the Indian resident individuals are allowed to remit up to USD 250,000 per financial year to another country for investments and expenditure. This limit is per individual including minors, which means that a family of 4 can remit up to USD 1 million per financial year. This quota includes any investments like US securities, real estate, and bank deposits, etc., and all expenses like foreign travel, and student education. Investors will have to complete and submit the LRS forms before they can actually start trading.
Forex rate difference
For starting to invest in global markets, investors will first need to remit money to their accounts opened with their broker. The money that can be remitted must be in US dollars or any other currency depending upon the market they are investing in. Before deciding on the amount that the investor would want to invest abroad, he must check the exchange rates and try to get the best rate possible with the help of his brokerage.
Safety net on the investment
Global investing accounts are held by brokerages and clearing services providers in the investor’s name. Their stocks and other securities are held with a custodian in their names. So, while selecting a broker for global investing, investors must cross-check about the safety nets being provided by the brokers to ensure the investor’s money is safe. The brokers must provide insurance that protects the securities and cash in the investors’ account.
(Ashma Zaveri is Chief Operating Officer at Monarch Global Access. Views expressed are the author’s own.)