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Should you invest in the foreign stocks? Know the pros and cons here

Indian investors are known to be inward-looking. They like to invest in Indian stocks rather than the foreign ones for it gives them a sense of security. Indians are free to invest in foreign stocks since 15 years but still they want to solely invest in the Indian stocks. Well, there are several benefits of stock investing in the foreign stocks while there are limitations as well. Indian economy grows much faster than that of other nations for it is a developing country.

An investor enjoys diversification in the stock investing portfolio

When you plan to invest in the foreign stocks, you have more options and so it diversifies investment portfolio. You can invest in varied industries and also various MCAP’s. To diversify the portfolio, invest in the companies’ foreign stocks already existing in your portfolio or belonging to the same MCAP. By diversifying your portfolio, you may totally protect the investment portfolio, safeguard it from losses. So, invest in the foreign stocks to stay away from the risks associated with the domestic market.

Benefits associated with market rebound rate

 

It is true that Indian securities offer a much better growth rate and even the foreign markets undergo crisis. Most problems in the stock investing market is triggered by the crisis in the US market. The Indian economy also suffers the crash whenever there is a problem in the foreign market. However, the market also benefits from rebounding. From December 2007 to the year 2013, the Indian market recorded a gain of 4.3% following a rebound. Similarly, during a recessional phase of 2008, when the US market crashed by 50%, it also provided a return of 50% following a rebound during 2007-2013. So, once the market returns to the previous levels, the investor is benefited from the rebounding market. The profit can be noticed more if you invest in the foreign stocks.

You get to know about the foreign securities

Investing in foreign stocks offer more exposure for you get to know about the securities available. Besides, there is more options in securities now when you wish to invest in technology-driven securities. You are no longer restricted to investing solely in Infosys, Wipro and TCS and can invest in Apple, Google and Microsoft.

Are there any risks involved in global investment?

Despite the fact you should invest in foreign equities, there are some limitations of such an investment. You need to be aware of the currency rate for the exchange rates keep on changing. The price of the international stocks is fixed in currency of that nation. So, as an Indian investor, you got to suffer the uncertainty of the stock and also the uncertainty of the foreign currency. If the value of foreign currency goes down, the price of foreign stock you hold also goes down.

Your gains through the foreign stock is taxed twice. First, you pay the tax for it being sold in the foreign nation and then your own country. But, a lot depends on your nationality and current resident status. You must analyze the benefits of investing in foreign stocks above the limitations. Associated risks must not turn you away from investing in foreign stocks.

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