The world beyond our borders

There’s a curious paradox in Indian investing. We live in the most globally connected era, yet our portfolios remain surprisingly local. We drive German-engineered cars, stream American shows on Korean screens and work for companies serving global clients. But when it comes to investing, many act as if the world ends at the Arabian Sea and the Bay of Bengal.

This isn’t entirely our fault. The Indian financial system has been designed to keep money within the country. From tax incentives that favour domestic investments to regulatory caps that limit overseas exposure, the message has been consistent. Indian savings should power Indian growth, and Indian investors should bet primarily on Indian opportunities. But India accounts for just 4.2 per cent of global market capitalisation. When we invest only domestically, we’re betting our entire financial future on roughly one-twentieth of international opportunities. This geographical myopia becomes even more puzzling when you consider what we’re missing. The world’s leading semiconductor companies, pioneers in artificial intelligence, and innovators in biotechnology aren’t listed on the NSE or BSE. 

A purely domestic portfolio bets everything on one economy, one currency and one regulatory regime. That’s not diversification; it’s concentration in disguise.

Yet just as this logic becomes compelling, the practical realities become frustrating. SEBI’s overseas investment cap has created artificial scarcity in international funds. Tax policies, whilst recently improved, still create friction. What should be a straightforward decision has become an exercise in navigating regulatory mazes.

The irony is that whilst individual investors struggle with these barriers, Indian companies have no such hesitation about going global. Tata Motors owns Jaguar Land Rover. Infosys serves global clients. Numerous companies quietly export the most sophisticated products around the world. These companies understand that geographical diversification isn’t just beneficial—it’s essential for long-term survival and growth. They hedge currency risks, navigate international regulations, and build supply chains that span multiple countries. Yet when these same companies’ shareholders consider their portfolios, they often revert to a purely domestic mindset.

This disconnect suggests the problem isn’t conceptual. Most investors understand the logic of global diversification. The problem is practical. The system hasn’t made it easy enough for the average investor to act on this understanding. Too many hoops to jump through, forms to fill and regulatory announcements to track. What should be as simple as choosing between equity and debt has become an obstacle course.

The good news is that change is happening, although slowly. Tax reforms have made international investing more attractive for long-term investors. New products are emerging despite regulatory constraints. Digital platforms are simplifying access. The industry is slowly recognising that complexity is the enemy of adoption. However, these improvements only matter if investors utilise them.

The question isn’t whether you should invest globally, the case for that is straightforward. The question is how much complexity you’re willing to accept to achieve geographical diversification. 

For most investors, the answer should be very little. Start with 10-15 per cent of your portfolio, pick a well-managed international fund or global ETF, and treat it like any other long-term investment. A modest allocation to international markets, implemented through simple products and maintained through systematic investments over long periods. Nothing fancy or speculative, just basic geographical diversification applied with the same discipline that you’d use to any other aspect of portfolio construction.

The world is a vast place, full of opportunities and risks that often don’t mirror what happens in India. Your portfolio should reflect that reality.

Also read: Think & invest beyond India