Understanding the purpose
‘Global Investing’ is simply investing in markets outside India. The primary goal of investing outside the domestic market is two-fold:
- To diversify an investor’s portfolio so that one is not fully exposed to domestic country’s political, economic or currency risk &
- to invest in opportunities that may not exist in the domestic markets.
The first part, diversification, is easy to understand. Creating a portfolio of all domestic investments is akin to keeping all your eggs in a single basket. Global Investing helps to balance risk and reward in your investor’s portfolio.
The second part is also intuitively understood. We cannot assume that all the best opportunities to invest happens to be available in our own country. There are so many companies and brands that we, and our investors, are all familiar with, be it Apple, or Microsoft, or Samsung, but we just do not have the opportunity to invest in them in domestic market. Thereby, global investing opens a plethora of opportunities in the field of technology and innovation.
Optimal Allocation
As with any investment, there are some risks involved with Global Investments as well, and a degree of understanding is required to ensure that they fit well into the overall portfolio of a client. With the right balance and understanding, one can create a well-diversified portfolio across different asset classes (including Global Investing) to optimise an investor’s portfolio. We recommend investing 10-15% of an investor's overall portfolio in offshore markets for a balanced approach.
Look Beyond
Two areas that Global Investments need to access the right opportunity are in the field of technology and innovation. We at Fintso, have worked on identifying some of these opportunities and have created investment baskets that offer investors an intuitive way to gain exposure to “what’s next”. These opportunities provide access to trends which are structural in nature and are expected to play out over decades and through market cycles.
Themes such as Machine Learning, Autonomous Vehicles, 3D Printing, Robotics, E-commerce, Energy Storage, Blockchain Technology, etc, are expected to be part of the future trends. Investors portfolio exposure to these trends in the Indian domestic market is near zero.
Portfolios designed by Fintso to tap these opportunities:
1. Disruptive Innovation Portfolio (DIP)
Investing in a basket of stocks that have enabled a new product or service that could potentially change the way the world works. The portfolio aims for thematic multi-cap exposure to innovation across sectors in US markets.
In the late nineteenth century, 3 innovation platforms (telephone, automobile, & electricity) evolved at the same time and changed the way the world worked. The world’s productivity exploded as costs dropped, unleashing demand across sectors.
Today, the global economy is undergoing the largest technological transformation in history thanks to several innovation platforms evolving at the same time such as Genomic Revolution, Artificial Intelligence, Automation Transformation, Energy Transformation, Next Generation Internet & Fintech Innovation.
Performance (%)
Performance as on December 31, 2020
2. Megatrends Portfolio (MT)
Investing behind powerful, transformative forces that can change the trajectory of the global economy by shifting the priorities of societies, driving innovation and redefining business models.
Evidence of megatrends is all around from robotics to genomics to clean energy. Choosing which company will become the leader in a theme can be difficult – what company will put forth the next life-changing medical breakthrough or the best self-driving vehicle?
Our portfolio holds a range of ETFs which in turn holds a range of companies positioned to benefit from a trend may be more effective than trying to pick individual winners.
Performance (%)
Performance as on December 31, 2020.
3. Silicon Valley Portfolio
The unfolding of the Covid-19 pandemic has accelerated the trend towards digitalization. There has been a rapid transition to remote work, schooling, and various other aspects of life.
This portfolio shall majorly invest in tech giants based in the US. The portfolio seeks to track stocks traded in the US from the technology sector and select technology-related companies to the communication services and consumer discretionary sectors.
Performance (%)
Performance as on December 31, 2020.
Demystifying Myths about Global Investing
Point 1: Global Investing is for the high net worth individuals (HNIs):
While it is true that access to this was limited to only HNIs, investing offshore is now accessible to all. Investing in any of these themes can be done with an initial investment of minimum $ 1,000 and subsequent top-ups can be done with minimum investment of $ 250 or more.
Point 2: Global Investing is complex and expensive:
The entire process for investing, and tracking has been simplified. Execution is seamless and digital, and the consolidation of all investments, including investors domestic Mutual Funds, allows an effective tracking. The expense ratio for these funds ranges from 1.5% to 2.5% and are in line with that of other Equity MFs and FoFs.
Point 3: Are the Brokers executing transaction safe
The baskets chosen are for the US markets only, and all trade execution is done by a US broker, who is a regulated entity. Further, the US brokerage ecosystem recommends that every investor account should have insurance. Investors need to assure that their brokerage partner is a member of the Securities Investor Protection Corporation (“SIPC”) which currently protects the securities and cash in your Account up to $500,000 of which $250,000 may be in cash.
About the Author:
Kumarpal Jain
Over the past 8-years in the Indian financial markets, Kumar has developed an intrinsic understanding of different asset classes and built an excellent product knowledge by working for top wealth management firms like Motilal Oswal and IIFL Wealth. He was a core member of the team that created the processes that were used for fund selection in both these previous organizations and is now working to bring the same level of research and advisory to financial advisors.
About Fintso
Fintso is an open architecture fintech ecosystem that brings together financial advisors, financial product manufacturers and vertical aggregators. With the aim of democratizing wealth management through existing unorganized players, Fintso provides a white labelled platform-as-a-service for financial advisors to operate their business of serving their investors and grow their brand and identity. Along with it, Fintso also pledges to bring the premium financial planning software India and the best financial adviser back office systems to help manage wealth effectively. The platform provides multi-product transaction execution capabilities along with proprietary research and advisory to financial advisors. Acting as a demand aggregator for asset managers and a means to become omni-channel and connect to a physical distribution network for online-only vertical fintech aggregators, Fintso is enabling them to reach wider audiences. Furthermore, with the all-new investing to broker ARN transfer platform, it strives to make things easy and hassle-free for the investors.