“What’s next” is a huge constant in everyone’s life. Especially in a world that is running so fast, we always keep wondering what is coming next. Improving, expanding, and going beyond has become a massive thing in the modern day. The same thing stands with investments too. If you are a person who has already begun to invest in the Indian stock market, and you have been doing well – what would be the next thing that you do? The very next thing that you do is try to take the next step. Don’t you think the next step would be going beyond the Indian stock market? So, let’s get going, shall we?
What Does It Mean to Invest Internationally?
When someone says they are investing internationally, it means they are going to choose assets that would mostly focus on foreign assets over domestic ones. Now, investing internationally is not as hard as you think. Maybe a few decades ago, it was close to impossible, but today the world does not stand in the same place, does it?
You can go through international brokers and several other platforms that give you access to the international markets.
However – there are still a few things that you cannot overlook when you start to or begin to invest in international stocks.
Things You Need to Know When You Invest in an International Market
These things are mostly too small for you to notice, or either the benefits and rewards that come with international investments are blinding, either way – here is a list of things that you have to keep in mind when you say you are going to start investing online:
1) There are political influences that you are not aware of: This would happen more than you would like. Just say you invest in the US Stock Market and all of a sudden, there is a presidential shift (though most of them follow the presidential elections of the US.) After which there is a sudden tax change, you cannot possibly follow every piece of news when it is across the border, can you? When it is the country that you are residing in, it becomes an easier job to keep an eye on everything that is happening around you. Therefore, we would say, if you are choosing the stock market of the United States, then you would want to gain access to their news, everyday updates, and much more in order to stay on top of the list.
2) You may not always find the same liquidity benefits: This is one big deal breaker when you invest internationally. With the Indian market, you know when you can invest, and you can also be sure of how long you can stay invested. When you want the funds through your inland stocks, you can liquidate them as you know the market situation. You would mostly be unaware of the market situation when it comes to international funds, and this would lead to low liquidity, and when you have a sudden need – you would be left only with more time to wait. So, be prepared for a wait, and don’t tie all of your money into international stocks.
3) Get all of the help that you need: Don’t shy away when it comes to getting help from financial advisors. You might not have needed them with the Indian investments, but using them for international investments can help you earn more and lose very less on your investments.
4) You might want to keep an eye on the transaction costs: Transaction costs can differ in India, and that is a given. But, since you will be invested in different currencies and from a different market, they could be higher. The ratios of deductions are smaller here when compared to international. If you are investing internationally, you are mostly investing in markets that are bigger than the Indian stock market, such as the United States, the UK, and much more. Therefore, it is a given that the currency value is much more, and so would the transaction value. You need to calculate how much your transactions and other charges would come up to when you invest in that particular market, and when you do that, you can be sure of how much returns you will be getting over your investments.
5) You are stepping into unknown territory: This does not mean you haven’t been to that country – this means, even if you have been there, it will take you one of the markets to know how the market works. If you are just starting off in the international market, it is going to cost you time, effort, and dedication in order to understand how the market actually works and how it is different from your home market. Every stock market works differently, beginning from time and points that could trigger falls and rises. It will take you time to absorb the new information; therefore, just stay patient and try to learn.
6) You will be at the mercy of the exchange rates: This could be a huge bummer, especially when you have just begun investing internationally, but it is what it is. Exchange rates can fluctuate, which means you will have to have a keen eye kept for them. But, when it is the exchange rates, you must be capable enough to bear the fluctuation.
7) Know your taxes: Your international stock’s returns will be treated as non-equity-oriented returns. When you hold your investments internationally for less than a period of three years, then you will be charged taxes based on your tax slab. But, if your investments have crossed three years, then they will be charged over 20%, plus a 4% surcharge.
This is just the tip of a huge iceberg, and there is quite a lot more to investing in the international market apart from these elements. You would want to have a piece of thorough knowledge of the international market you want to invest in before you can start investing there.