Certain things look a little complicated until they are tried out

Investing in stocks of companies like Apple, Amazon, Microsoft, Google and Facebook seems a tad bit complicated, doesn’t it?

It seems very complicated but it is actually not.

I am sure you have thought about investing in Apple, Amazon, Microsoft, Google or Facebook, despite the fact that these companies are not listed on Indian stock exchange(s). Indian investors can still invest in them directly through mutual funds.

There are quite a few mutual funds in India with international themes. You can now invest in Chinese, American, Japanese, Asian Equities by investing in mutual funds being offered in India.

It is like investing in any other mutual fund in India. You can do these purchases in Rupees like any other mutual fund investments. There are no different process requirements for investment in such mutual fund schemes.

PPFAS Mutual Fund house, which offered only one mutual fund scheme –Parag Parikh Long Term Equity Fund (PPLF) till recently, give you the chance to invest directly in these big international companies via a mutual fund scheme. Let us look into this fund in detail.

Parag Parikh Long Term Equity Fund

This is a multi-cap equity oriented mutual fund which also invests in international stocks.The domestic portion of the scheme is managed by Mr. Rajeev Thakkar, while Raunak Onkar manages the foreign investment component. The investment objective of the Scheme is to seek to generate long-term capital growth from an actively managed portfolio primarily of equity and Equity Related Securities.

Here is the key information of this fund:

Launch Date 24 May 2013
NAV (11 June 2018) ₹24.6082
Plan Type Direct
Rating by Groww 3 Star
AUM (Fund Size) ₹987 Cr
Riskometer Very High
Minimum SIP ₹1,000
Minimum SWP ₹1,000
Performance w.r.t its Benchmark Has consistently outperformed its benchmark NIFTY 500 since its launch.
Age of the fund 5 years old
Expense Ratio 1.50%
Exit Load If redeemed bet. 0 Days to 365 Days; Exit Load is 2%; If redeemed bet. 365 Days to 730 Days; Exit Load is 1%;
Type  Open Ended

Returns per annum over the years from this fund are:

This fund has given very good return since its launch and is less risky in the multi cap category due to its additional diversification. The ideal tenure of investment is more than 5 years to get potential return from this fund.

Duration Returns
1 year 16.26%
3 years 14.32%
5 years 19.84%
Since launch 19.56%

Holding Analysis of Parag Parekh Liquid Fund:

This fund’s investment universe is not restricted by any self-imposed limitations in terms of sector, market capitalization, geography, etc. However, an average of 65% of its corpus will be invested in listed Indian equities, in order to benefit from the favorable Capital Gains tax treatment accorded to such schemes. Top 5 international holdings of this fund are:

Name of the Instrument Industry % to NAV
Alphabet Inc. Prev (Google) Software 9.81%
Suzuki Motor Corp (ADR) Auto 4.99%
Facebook Inc. Software 4.66%
3M CO Industrial Conglomerates 2.20%
International Business Machines Corp (IBM) IT Consulting & Other Services 1.93%

Top 5 domestic holdings of this fund are:

Name of the Instrument Industry % to NAV
HDFC Bank Ltd Banks 6.79%
Bajaj Holdings & Investment Ltd Finance 6.16%
Balkrishna Industries Ltd Auto Ancillaries 5.53%
Persistent Systems Ltd Software 5.39%
Zydus Wellness Ltd Consumer Non Durables 4.98%

How to Invest in International Stocks From India (Without Investing in Mutual Funds)

India’s share of world GDP is just around 7%. To you, as an investor, that means that 93% of world GDP remains untapped. But, today we look at this unexplored issue because of another important reason i.e diversification across economies. Have you ever wondered if it’s wise to invest 100% of your portfolio in Indian stocks and bonds? True diversification also implies diversification across countries. So, here are the various ways to invest in stocks of big foreign companies from India.

1. Directly invest in foreign stocks

For directly investing in stocks of foreign companies, you will have to open an account with a brokerage firm that offers overseas trading facility. You would also need to intimate the RBI.

The overall process is as follows:

  1. Open a trading account with a brokerage house like ICICI Direct, Kotak Securities etc. that offer overseas trading facility. These domestic brokers have tied up with international partners to allow this.
  2. Submit duly filled separate account opening form along with know-your-customer (KYC) documents.
  3. For investing/trading in foreign stock markets, you are required to transfer money to the international partner of the domestic equity broker through whom the service is provided.
  4. Funds are transferred to the international partner as below:
    • Submit application i.e, declaration form under LRS,
    • Form A2 (this will be available with your brokerage house),
    • Sign a form for Foreign Exchange Management Act (FEMA) declaration (this will be available with your brokerage house),
    • Form authorizing the designated bank branch as an authorized dealer (this will be available with your brokerage house).

Once the funds are transferred, you can start buying and selling foreign stocks on the online platform.

Things you need to know:

  • The Reserve Bank of India (RBI) allows an individual to remit $ 250,000 per financial year (April-March) under the Liberalized Remittance Scheme (LRS), which can be used for investing abroad.
  • There is no thumb rule as to how what percentage of your portfolio should be invested abroad. The idea is to diversify your investments.
  • Make sure the underlying businesses of the foreign companies you want to invest in are strong and promising. Don’t diversify for just the sake of diversification.
  • It takes around 24 to 48 hours to remit money from your bank account to your trading account with the foreign broker and around 48 to 72 hours from your trading account to your bank account.
  • You may remit funds in one of the many global currencies from your bank account to your trading account but you need to decide the base currency in which you want to settle your transactions. So, if you set USD as the base currency in your account, then all stock exchanges which accept payments in USD will settle your transactions in USD automatically.

2. Global Funds

Another option is to invest through Global mutual funds. These funds are denominated in local currency and there is no limit to investing in these funds, unlike direct investments which are capped at US $ 250,000. This is because payment for such funds is made in local currency and hence no foreign exchange flows out of the country.

Some Mutual Funds that invest in US:

Franklin India Feeder – Franklin U.S. Opportunities Fund

The Fund seeks to provide capital appreciation by investing predominantly in units of Franklin U. S. Opportunities Fund, an overseas Franklin Templeton mutual fund, which primarily invests in securities in the United States of America. Here is the key information of this fund:

Launch Date 02 January 2013
NAV (11 June 2018) ₹27.2814
Plan Type Direct
Rating by Groww 2 Star
AUM (Fund Size) ₹498 Cr
Riskometer Moderately High
Minimum SIP ₹500
Minimum SWP ₹1,000
Benchmark Russell 3000 Growth
Age of the fund 5 years old
Expense Ratio 1.01%
Exit Load If redeemed bet. 0 Month to 12 Month; Exit Load is 1%;
Type  Open Ended

Returns per annum over the years from this fund are:

Duration Returns
1 year 18.86%
3 years 10.50%
5 years 17.83%
Since launch 18.25%

DSP BlackRock US Flexible Equity Fund

The primary investment objective of the Scheme is to seek capital appreciation by investing predominantly in units of BlackRock Global Funds US Flexible Equity Fund (BGF – USFEF). The Scheme may, at the discretion of the Investment Manager, also invest in the units of other similar overseas mutual fund schemes, which may constitute a significant part of its corpus. Here is the key information of this fund:

Launch Date 03 January 2013
NAV (11 June 2018) ₹24.6515
Plan Type Direct
Rating by Groww 1 Star
AUM (Fund Size) ₹172 Cr
Riskometer Moderately High
Minimum SIP ₹500
Minimum SWP ₹1,000
Benchmark Russell 1000
Age of the fund 5 years old
Expense Ratio 1.27%
Exit Load If redeemed bet. 0 Month to 12 Month; Exit Load is 1%;
Type  Open Ended

Returns per annum over the years from this fund are:

Duration Returns
1 year 21.41%
3 years 12.12%
5 years 14.87%
Since launch 16.77%

ICICI Prudential US Bluechip Equity Fund

The investment objective of ICICI Prudential US Bluechip Equity Fund is to provide long term capital appreciation to investors by primarily investing in equity and equity related securities (including ADRs/GDRs issued by Indian and foreign companies) of companies listed on New York Stock Exchange (NYSE) and/or NASDAQ. Here is the key information of this fund:

Launch Date 02 January 2013
NAV (11 June 2018) ₹25.19
Plan Type Direct
Rating by Groww 2 Star
AUM (Fund Size) ₹149 Cr
Riskometer Moderately High
Minimum SIP ₹500
Minimum SWP ₹1,000
Benchmark S&P 500
Age of the fund 5 years old
Expense Ratio 1.11%
Exit Load If redeemed bet. 0 Months to 3 Months; Exit Load is 3%; If redeemed bet. 3 Months to 12 Months; Exit Load is 1%;
Type  Open Ended

Returns per annum over the years from this fund are:

Duration Returns
1 year 18.43%
3 years 14.26%
5 years 17.87%
Since launch 16.42%

3. Exchange Traded Funds (ETFs)

If you want to invest in international indices, then ETFs mutual funds are the option. Exchange Traded Funds (ETFs) are investment products which allow domestic investors to take exposure to international indices. ETFs are passive investment instruments based on indices and invest in securities in the same proportion as the underlying index. Characteristics of ETFs:

  • They are listed and traded on a stock exchange like common stocks. So, can be bought and sold at any time of the day.
  • ETF includes almost every investing asset class including commodities or currencies. It gives you exposure of any market, any sector in the world.
  • Liquidity of ETF is very high and charge lower fees.
  • Investors can place different types of order for buying ETFs like stop-loss order, buy on margin etc, as they are traded like stocks in the market.

Things to Remember

There are a lot of factors you should look into before selecting a mutual fund scheme which will let you invest in foreign stocks. Following the few important things you should always remember before investing in foreign stocks:

  1. Higher rates: Don’t blindly invest in the fund or stocks with the highest returns. Invest based on the duration you want to invest for.
  2. Every person’s financial condition is different. Evaluate the funds you invest in yourself – don’t invest in a fund because of its popularity.
  3. Equity oriented mutual fund are best for long-term investment tenure and through Systematic Investment Plan (SIP). SIP is much better and safer option for investing in equity oriented mutual funds.
  4. Direct plan for mutual fund gives you higher returns as compared to the regular plan of mutual fund schemes.
  5. Review your investment from time to time but not too often. Once a few weeks is good enough.

Investing in mutual funds online is very simple and paperless. Simply log in to your Groww account, choose a fund, and invest using net banking – exactly like you would when shopping online.

To look at some of the best performing funds from every category of mutual funds, check out Groww 30: Top funds in every mutual fund category. 

Happy Investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.