Investing abroad is quite easy through the mutual fund route
and can bump up your total portfolio returns.
It's been difficult to make money from equities in the last
three years. The BSE Sensex has largely traded between 15,500 and 21,000 in the
past two years, and if you’d not got your timing right on the broad market, it
would have been tough to beat even fixed deposit returns. Yes, there have some
money-making opportunities like in the fast-moving consumer goods sector or
stock-specific stories, but otherwise it’s mostly been range-trading.
A spate of positive news from the government in the past few
weeks has taken the stock market indices to a 15-month high and the Sensex is
up 15.5 per cent over the last 12 months. But over a two-year period, the
Sensex has lost 6.75 per cent. Even the three-year compounded return is a
measly 3.85 per cent, which is less than the yield on expensive real estate.
But one investment category that has done very well this
year is international mutual funds. There has been the kicker of 8-9 per cent
rupee depreciation in one year, which adds to the returns, but even without it
international funds have given reasonably good returns. Eleven of 32
international funds tracked by Value Research have earned over 25 per cent. The
best performer is the Motilal Oswal MOSt Shares Nasdaq-100 ETF (exchange-traded
fund), which is up 40 per cent in one year. This Nasdaq-100 index ETF offers
domestic investors an option to invest in the best tech companies of the world.
Apple has nearly 20 per cent weightage in the index, and since the stock has
gained 50 per cent over the past year, the index has managed to reach a 12-year
high. If you think Apple is going to crack the four-figure mark from the
current $673.5, then this ETF may make a good investment. Along with Apple, the
other heavyweights of this index include Microsoft, Google, Oracle, Amazon and
Intel, and all of these add up to 46 per cent of weightage.
The other international funds available for Indian investors
through the mutual fund or ETF route invest in Hong Kong’s Hang Seng index,
China, Asean, other emerging markets and even Brazil by geographies. Others
such as gold mining, real estate, mining, agriculture, commodities and energy
offer sector or thematic options. Some of these are index funds, while the
others are fund of funds. The JP Morgan JF Asean Equities Off-shore fund, a
fund of fund investing in South East Asian companies, has posted 36.5 per cent
annual gain with Singapore’s DBS Group being its top holding. Fidelity Global
Real Assets, up 33.5 per cent in a year, is a fund of funds investing in
commodities, property, industrials, utilities, energy, materials and
infrastructure, with Exxon being its top holding.
Investing abroad gives an option of geographical
diversification. For a long time, Indian investors didn’t have the option of
buying foreign securities, which is now opened up. Also, the Indian market was
providing better returns than many other global markets, which isn’t the case
right now. Even as our current market rally progresses, investors could think
of starting to learn the ropes.
Domestic investors also need to look at global investments
more seriously considering that when our government was hit with policy
paralysis, there was little money-making opportunity besides gold and a handful
of stocks and sectors. Yes, the currency is a risk but one can factor that in
or even invest abroad as a currency play. The existing funds and ETFs provide
good opportunities to access global markets in a tax-efficient manner.
Derivatives of the Dow Jones Industrial Average, the S&P 500 and the FTSE
100 are traded on the National Stock Exchange but unlike the mutual funds,
these are not exempt from long-term capital gains tax. And if you want to buy
Turkey, lumber or natural gas ETF, you can always open a brokerage account to
trade abroad up to an investment of $200,000 (Rs 1 crore) per person a year.
Source: http://www.business-standard.com/india/news/niraj-bhatt-how-you-can-invest-in-google-appleexxon/188515/on
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