Want to invest in Google, Apple, Facebook, Amazon? You can do it this way
Most of the investors would like to put their money in companies like Google, Apple, Microsoft, Amazon, Wal-Mart, and Facebook, as currently they dominate the world, and offer great potential and growth prospects.
Most of the investors would like to put their money in companies like Google, Apple, Microsoft, Amazon, Wal-Mart, and Facebook, as currently they dominate the world, and offer great potential and growth prospects. Investment in foreign stocks also helps investors balance their portfolio in volatile times. These companies have a presence across the world. However, these are not listed on the Indian stock exchanges. If Indian investors want to put their money in these companies' stocks, they have to either invest directly or through mutual funds/Exchange Traded Funds (ETFs).
According to the RBI rules, an Indian citizen can invest $250,000 per financial year (April-March) in overseas financial instruments under the Liberalised Remittance Scheme (LRS). Investors can buy foreign stocks and debt instruments in the overseas markets with this money, according to Sana Securities.
If investors want to get exposure in a particular set of companies then they have to invest directly through the secondary market. They can also invest in these companies through mutual funds or exchange-traded funds. However, in this case, funds are more diversified and investors will have limited exposure in particular stocks, Mumbai-based tax and investment expert Balwant Jain said.
Jain cautioned that investors should take investment decisions on the basis of their understanding of the foreign stock market and their risk-taking abilities.
"Many times, even the mightiest companies can't sustain in this ever-changing market. Take the example of Yahoo, which once dominated the market, but it is now much smaller than Google. With time, many things change and with too much technological change it is difficult to predict what changes are waiting for us a year ahead. Therefore, the investors should be very careful and vigilant with their investment and monitoring of the stock performance, Jain said.
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"One who has a limited understanding of global trends and time constraint should make their exposure in foreign companies through mutual funds or ETFs," Jain added.
Unlike domestic mutual funds, these funds are affected by the change in currency rates as these are denominated in local currencies. There is no limit to investing in these funds, according to Sana Securities.
How to invest in overseas stocks directly?
1. The investors have to open a demat or trading account with a brokerage house which offers the overseas trading facility.
2. Fill up a separate form of partner broker of your broker in foreign countries. They also have to submit "know-your-customer (KYC)" documents.
3. The investor has to transfer money to the international partner through the domestic broker to start trading.
4. The investors may ask their broker to help fulfil all criteria, as they have to follow the Foreign Exchange Management Act (FEMA) rules.
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