By Shripal Shah
Many Indians who had planned to enjoy an overseas holiday last summer got a rude shock in March last year, when an uncontrollable virus wrecked their travel plans. Little did they know that the virus would not stop at that, but would go on to enforce extended lockdowns, movement restrictions, and radically change the way they consume, work and interact.
While the Covid-19 pandemic may have unleashed unprecedented challenges unto humanity, it hasn’t been all gloom and doom. The year 2020 will be remembered as the year that accelerated our transition to the digital, virtual world.
The virus forced us to shut our doors and stay indoors, but it has not been able to curtail our minds, our dreams and most importantly our aspirations. By simply tapping on our handheld devices, we have been able to manage our lives seamlessly, be it ordering goods, connecting with friends and family, making payments, watching movies, or even managing our investments.
With the government and the Reserve Bank of India (RBI) taking various fiscal and monetary measures to support the economy, money supply in the economy increased, and interest rates reduced drastically. During this period, asset classes like real estate and bank FDs became less attractive and safe haven like gold and silver, as well as financial assets like direct equities, became the most favoured asset classes to invest among Indians.
We saw a phenomenal surge in the number of new investors flocking into the Indian stock markets in 2020. A similar phenomenon was witnessed worldwide, including the US, which too saw an influx of investors. This was further propelled by new fintech players like Robinhood. Back home in India, investors were watching the global trends with keen interest and were excited to participate in the world market. Seeing the growing interest, many players in India along with fintech players also enabled and made global investment easier for Indians.
Time for global flavours
The year 2020 has shown us how some of the biggest tech giants – Facebook, Apple, Amazon, Netflix and Google – have become increasingly integral to the lives of urban, aspirational Indians. Recently Tesla announced next year they would launch of their new car in India, which also caught the fancy of many car enthusiasts.
The question is – Why stop at being just passive consumers? Why not invest and participate in the growth stories of these very global brands that have now become household names for us?
With several Indian brokerage firms offering global investing platforms through tie-ups with overseas brokers, investing in your favourite global brands is now easy and hassle-free.
The US continues to be the most powerful economic engine of the global economy. The US stock markets alone dominate more than 50% of the global stock market capitalisation. It is also home to many of the world’s leading innovators and technology companies. By accessing the US stock markets, you can tap into a vast spectrum of investment opportunities.
If you consume and like the products and services of global companies like Facebook, Apple, Google, Netflix, Amazon etc. why not invest in them? With global investing, you get a chance to invest in global brands that you have closely interacted with as a consumer. These companies have generated phenomenal returns for the investors till now.
Global investing also allows you the opportunity to expand your investment horizons and enjoy the benefits of diversification. It lowers the country-specific risk that your domestic stock portfolio bears. Besides diversification in terms of markets, global investing also offers you a chance to have a global currency portfolio. By having dollar-denominated investments as well, you lower the risks of having an entirely rupee-denominated investment portfolio. In fact, with the recent weakening of the US dollar against most of the currencies including Indian Rupee, investors can now get to buy the dollar at lower rates.
Slow & Steady
While global investing offers many attractive opportunities, it is also important to follow an optimal allocation strategy basis your risk profile. The best and the safest way is to start small, and invest fixed amounts on a period basis.
In fact, global investing platforms now allow you to buy even fractional shares. You could even start an SIP and invest small amounts in your favourite global brands. While global investing offers you the chance to invest in your favourite global brands, it is also important that you back your investment decisions with proper research and due diligence. For optimal investment results, invest with a long-term horizon of at least 3-5 years.
If foreign travel, foreign education, buying overseas real estate are on your mind, then global investing can be the ideal vehicle that aligns with your financial goals and global aspirations.
(The author is the President – Head Operations, Finance and Technology at Kotak Securities. The views and opinion expressed in the column are personal. Please consult your investment advisor before investing.)