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How can I mitigate country and currency risk?
Dhirendra Kumar makes a case for international funds to diversify and de-risk your portfolio
31-Oct-2019
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How can Indian retail investors diversify their portfolio to mitigate country and currency risks?
- Aakash
You have some interesting options. You have international funds available here. To buy these funds, you need to follow the same process that you follow to buy a domestic mutual fund. However, these funds invest abroad. There are two-three ways of investing in international funds. You can have a fund that is mainly a domestic fund but invests a part of its money in stocks abroad. So, it will be able to de-risk a part of your assets (maybe 15-25 per cent). Here you will also get all the tax treatments of a domestic equity fund, as a minimum of 65 per cent is invested in Indian equities. Besides, you can opt for those funds that are sold in India but invest abroad completely.
And of course, any investor can invest abroad on his own by opening a brokerage account with an international broker. The process is very simple. You can invest up to $200,000 annually, which is quite a sizable investment allocation to facilitate in a year. But it would be complex, as you will have to choose your investment.
Here, I would also like to add that all of us have our jobs and our investments here. So, why not diversify and de-risk yourself? On these parameters, the case for international investing is very strong.
That apart, I find that some US-domiciled funds or US-targeted funds have proved to be very interesting. The kinds of companies you get there and businesses you are able to invest in are innovation-driven and technology businesses which are global in nature. The entire world is their market and we don't get them here. All of us are used to Google and Amazon but can't have them as a shareholder here. You can invest in them through such funds. There are also Nasdaq 100 exchange-traded funds.
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