Sensex or Nasdaq, London Stock Exchange or NSE? Development in
technology has decreased the meaning of intercontinental borders. Now
the entire world acts upon a single marketplace. Distance has been
limited. In India, data shows that, Indian investors trade in almost 24
major global indices including that of US, Europe and Asia, enjoying
live prices and streaming graphs from the comfort of their sofa.
“Wealth
managers say Indians are only investing in US stocks that have the
potential to yield 15-20% returns over the next one year. Such a “gain
range” will help Indian investors tide over the currency risk. The
rupee, which closed at an all-time low of 53.97 on Monday, has
depreciated 2.06%over the past one month. Domestic markets have not
performed now over a three-year cycle and this is prompting a small
section of the high net worth investors to evaluate opportunities in
developed and emerging market equities,” says Prateek Pant, head
-products & services, RBS Private Banking India.(www.economictimes.indiatimes.com)There are many financial products to choose from. The idea is the same as going to your local grocery store and asking for apples or bread. Is it that simple? Yes it is. Following a simple procedure you are ready to start trading the global markets and become part of the millions of people around the world who seek returns from their investments. You might think you are a “rookie” in a difficult basketball game, but there are people and companies that will take you by the hand and show you step by step the wonderful world of investing and trading the global markets.
There are a lot of benefits from investing abroad. “Putting your eggs in one basket” is not right and this has been the corner stone of investor philosophy when dealing with the globalized markets. Global diversification has allowed investors to break the boundaries of individual countries and seek different products and sectors in different countries. For example, high net value persons who have an accumulated amount after putting money in insurance, mutual funds, real estate and equity in India. They can then look at global markets and products and minimize risk from their investments from international and currency concerns. A good research should always be made in depth before any money is invested. Academic research and news on international markets and financial products are sometime not easily available and it usually takes time and personal responsibility.
Also, the political risk is also limited to the country you are investing. So how do you begin?
Following a simple procedure is rather easy for someone to get started. All you need is a bank account with a branch that allows foreign remittances and an account with a provider like Reliance Money or Man Financial, or a banking institution which provides options for international investments. Indian companies have close links with international trades and brokers and will allow Indians to use their platform. Through these platforms investors can use it to buy/sell stocks, commodities, indices, derivatives, etc. Currently it is very popular to invest in equity, indices, currency and commodity derivatives.
So what do you buy?
Apples or shares? Bread or Bonds?
1) Direct investments in blue-chip stocks abroad are becoming popular.
2) Mutual funds abroad.
3) Exchange traded funds (ETFs): For investors, bullish on a particular country, an ETF offers access to a diversified set of stocks from that country.
4) Some ETFS listed on Indian stock exchanges track foreign indices such as Nasdaq100 and Hang Seng.
5) Feeder funds launched by Indian mutual funds.
6) Buy index futures of foreign indices such as S&P500, DJIA, FTSE on NSE.
7) Dedicated ETFS for specific themes such as emerging markets, or alternative assets such as water and soft commodities.
What to watch out for?
1) Currency risk.
2) Tax treatment of the investment product.
3) Regulatory and reporting issues.
(www.economcitimes.indiatimes.com)
Some more information about all those thinking to invest abroad for the first time.
- As of 2012, the top ten financial centres according to the Global Financial Centers Index in the world are:London,New York City, Hong Kong, Singapore, Tokyo, Zurich, Chicago, Shangai, Seoul, Toronto.
- The table at the bottom lists the top 10 most heavily traded exchange-traded products, highlighting the funds that will generally be the most liquid. Generally, ETFs with the highest average volume are used widely as trading vehicles among active traders. The figures below reflect the average daily trading volume for each ETF over the previous three month period; this metric is less susceptible to daily fluctuations than is the normal daily volume metric.
- What are the top 5 traded commodities? 1. Oil 2. Coffee 3. Steel 4. Gold 5.Wheat
- What are the top 5 traded currencies? US dollar, Euro, Japanese Yen, British Pound, Swiss Franc.
|
Symbol
|
Name
|
Avg Volume
|
AUM
|
| SPY | SPDR S&P 500 | 167,747,922 | $107,637.8 M |
| XLF | Financial Select Sector SPDR | 80,861,914 | $6,221.3 M |
| IWM | Russell 2000 Index Fund | 54,728,215 | $15,520.2 M |
| EEM | MSCI Emerging Markets Index Fund | 53,834,266 | $33,942.3 M |
| QQQ | QQQ | 52,164,727 | $32,780.4 M |
| VXX | S&P 500 VIX Short-Term Futures ETN | 51,234,430 | $1,543.3 M |
| TZA | Daily Small Cap Bear 3X Shares | 23,423,582 | $661.7 M |
| VWO | Emerging Markets ETF | 22,930,076 | $50,903.9 M |
| EFA | MSCI EAFE Index Fund | 21,148,879 | $34,333.7 M |
| SDS | UltraShort S&P500 | 20,105,010 | $1,844.9 M |
