Overseas funds, direct stocks and ETFs – Choose to go global with your investments

You can buy stocks listed on US stock market indices such as Nasdaq100 or S&P 500 by opening a foreign trading account with any international brokerage firm.

Indian Mutual Funds offering global Fund of Funds are a cost effective way of investing abroad.

Invest in US Stocks: How to invest in US stocks from India? If this is what you are thinking about, you are probably not alone. Going by the latest AMFI data, an increasing number of investors in India are looking to invest abroad. When it comes to investing through mutual funds, Fund of Funds (FoF) that are investing overseas are an easily available source for Indian investors who wish to diversify their domestic portfolio.

Back in August 2020, there were about 3.21 lakh number of Folios in FoFs ( funds investing abroad), while on August 31, 2021, the number rose close to 10.32 lakh. The Net Assets Under Management grew from about Rs 5000 crore to nearly Rs 21000 over the same period of 1 year.

International mutual funds or overseas funds have been available to Indian investors for a long time but the popularity seems to have gone up in the recent past. “Indian Mutual Funds are offering global Fund of Funds in India. The NAV is in Indian Rupees and the minimum investment is Rs 5000. These adhere to the Indian Mutual Fund Regulations and are a cost effective way of investing abroad,” informs Ashish Ranawade, Head of Products, Emkay Wealth Management.

Thanks to the US FED infusing stimulus after the outbreak of Covid-19, the global liquidity led stock market rally across countries brought in a larger interest in investing in equity markets abroad. Some of the leading tech giants of the world listed on the Nasdaq stock exchange have been on the front leading the bull run over the past 18 months. The continuous run of most US stocks, primarily the FAANG stocks have now reached the Indian shores and is giving an opportunity to investors to diversify abroad.

You can buy stocks listed on US stock market indices such as Nasdaq100 or S&P 500 or any other US index. The process is simple and it takes a few days to open a foreign trading account with any international brokerage firm. Once the account is open, you can buy shares of Tesla or any other stock with a click-of-a button similar to buying shares in India. It is also possible to buy US shares in fractions as Fractional Investing is allowed in the US stock market.

Also, there are mostly all big fund houses in India offering international funds through which you can invest abroad. Some of them are FoFs while some others could be Feeder Funds.

In the case of FoF, you will invest in a scheme of a fund house which in turn will invest in units of global schemes or ETFs. By investing in the FoF of the Indian fund houses, you get exposure to global companies. Such FoF could also be available in the form of ETFs and can have varying themes. “ A couple of ETFs have also been offered in India, which are also a very efficient and effective way of investing abroad,” adds Ashish. Some may be passive funds tracking an international stock market index or some could be benchmarked against a specific sector.

Some prominent overseas funds for investing abroad

HDFC Developed World Indexes Fund of Funds (NFO)

Aditya Birla Sun Life International Equity Fund

Mirae Asset Great Consumer Fund

Aditya Birla Sun Life Commodities Equities Fund – Global Agri Plan

ICICI Prudential US Bluechip Equity Fund

Nippon India US Equity Opportunities Fund

Nippon India Japan Equity Fund

Aditya Birla Sun Life International Equity Fund

Franklin Asian Equity Fund

Motilal Oswal Nasdaq 100 Fund of Fund

PRINCIPAL Global Opportunities Fund

DSP World Energy Fund

Edelweiss US Technology Equity

Edelweiss US Value Equity Offshore Fund

Aditya Birla Sun Life Global Excellence Equity

Invesco India Feeder – Invesco Global Equity Income Fund

Franklin India Feeder – Franklin U.S. Opportunities Fund

Invesco India Feeder – Invesco Pan European Equity Fund

DSP US Flexible Equity Fund Fund of Funds-Overseas

Aditya Birla Sun Life Global Emerging Opportunities Fund

DSP World Mining Fund Fund of Funds-Overseas

PGIM India Emerging Markets Equity Fund

ICICI Prudential Global Stable Equity Fund

DSP World Agriculture Fund

Franklin India Feeder – Templeton European Opportunities Fund

Kotak Global Emerging Market Fund

HSBC Global Emerging Markets Fund

ICICI Prudential Global Advantage Fund

HSBC Asia Pacific (Ex Japan) Dividend Yield Fund

Edelweiss Emerging Markets Opportunities Equity Offshore Fund

Edelweiss Greater China Equity Offshore Fund

DSP Global Allocation Fund

HSBC Brazil Fund

DSP World Gold Fund

For beginners looking to invest abroad, in order to diversify their portfolio, can consider FoF or ETFs. “ETFs are very well diversified as well. Only those investors who feel confident of their acumen and ability to track companies should invest directly. For those making a beginning, ETFS and Global Funds are a better way to invest. For example, in the case of pharma companies, it would have made sense to invest in the entire pharma basket rather than one company because we don’t know which company would have been successful in developing a cure / vaccine for Covid 19. The ETF options available globally are far too many,” says Ashish.

Out of the total allocation that you wish to do in international funds, you need to build a portfolio with direct stocks, ETFs and even funds with a common theme. “One another reason why it makes sense to invest in a fund rather than an individual company is there are various listed Funds in the US markets following different themes and it makes sense to invest in a particular theme or a group of companies rather than a single company as it reduces the risk significantly in case a particular technology were to fail or get disrupted,” says Ashish.

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