Friday February 13, 11:00 AM
Go Global with your Money! |
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By Personalfn.com
The Reserve Bank of India has recently permitted “resident individuals” (Indians) to remit upto USD 25,000 per calendar year “for any purpose”. This has thrown up a lot of opportunities for us investors. Here we take a look at the guideline and also some investment opportunities that are now available to us.
The Reserve Bank of India has recently permitted “resident individuals” (Indians) to remit upto USD 25,000 per calendar year “for any purpose”. This has thrown up a lot of opportunities for us investors. Here we take a look at the guideline and also some investment opportunities that are now available to us.
The relevant extract from the guideline
“… resident individuals may freely remit upto USD 25,000 per calendar year for any purpose…”
Who is eligible -
All resident individuals. This facility is not available to corporates, partnership firms, etc.
Purpose -
a. for any current or capital account transactions or a combination of both
b. to acquire and hold immovable property or shares or any other asset outside India
c. to open, maintain and hold foreign currency accounts with a bank outside India
This facility is in addition to those already available for private travel, gift remittances, studies, donations etc i.e. you can remit USD 25,000 pa over and above the remittances that are permitted under any other exiting guidelines.
Download the RBI press release for a detailed note on the guideline.
In short, we now have the option of going global, as far as our wealth management is concerned! And just in case you had hopes of building a stock portfolio like Warren Buffett's, now is the time to do it!
Why invest in global markets…
The rationale for investing in global markets is straightforward -
To increase diversification in your portfolio and thereby minimise risk. For example -
currency risk - a depreciating Indian Rupee will make you relatively poorer globally. Being invested in different currencies will reduce any such risk. Although the Indian Rupee has recently gained 5% against the US Dollar, it continues to fall against other currencies like the Australian Dollar, British Pound and the Euro.
event risk - if India were hit by a large calamity or there is an event which throws the entire economy off gear, all your Indian assets would respond in a similar manner. On the other hand if you were invested in different markets across the world, the likelihood of all responding in a similar manner is greatly reduced. However, unusual events like “9/11” and the fear over SARS can have an impact on all global assets.
To benefit from opportunities available outside India. Indian companies may be growing for sure and may be shining but so are companies in other parts of the world.
But where to invest…
You could consider making investments in -
Bank accounts - very low returns and very low risk
Corporate and government bonds and debt mutual funds - little higher returns and little higher risk
Equities and mutual funds - a better investment over a longer time horizon, although equities can be more volatile (risky) in the near term
How to invest?
There are four ways you can invest money in global stock markets -
Invest directly in stocks (on your own by opening an online account with a broker)
Opt for the services of a portfolio manager
Invest in mutual fund schemes being launched in India for the purpose
Invest in mutual funds already in existence overseas
Need assistance?
At Personalfn and Equitymaster we are taking initiatives to ensure that you are ahead of the curve when it comes to benefiting from this opportunity. Over the last fifteen years we have focused our efforts on empowering you with credible research and investment tools for the domestic markets. We are now ready to assist you in planning your investments in the global markets.
To know more about investing globally, click here.
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