How to Profit from the Unstoppable Growth of Global Tech Companies
Indian investors have started looking abroad for finding returns that the Indian market has not been able to deliver. Businesses such as Apple, Amazon, and Microsoft have been able to deliver fantastic returns as the pandemic shows just how entrenched they are in our lives. Unfortunately, India really does not have any ‘untouchable’ business right now perhaps with the exception of the juggernaut that is Jio.
Online betting sites in India reported an industry-wide gain of 21% during the pandemic but that none of these gaming companies are actually registered in India otherwise they seem to be pretty bullet-proof as well.
So, what is the easiest way to invest your money abroad?
Fund of Funds
There are several offerings right now in the market that utilize the ‘Fund of Funds’ route to let Indian invest abroad with complete simplicity. Motilal Oswal Nasdaq 100 Fund is an example of one fund that allows Indians to invest in the Nasdaq index just as they would in an Indian mutual fund.
The biggest advantage of this route is simplicity. You start a SIP or make a lump sum investment just like you otherwise would and then let the fun manager take care of the rest. You purchase ‘units’ in the Fund which is then invested in Funds abroad, hence the name Fund of Funds.
Investors need not worry about being taxed twice when they sell their units, however, their long-term gains will be taxed at 20% just as they would be taxed on their debt fund gains.
There are other ways of investing directly into stocks abroad, however, we would advise that to be left to experienced investors. Of course, the gain that you get by investing in just a couple of solid companies like Apple or Amazon is going to be much more than by buying the entire Index.
Why look abroad, though? Is it the right thing to do?
We certainly think it is worth having a component of your portfolio in trusted companies abroad. You are hedging your bets on companies that are functioning around the world and have dominant positions in their areas. It seems unlikely that some upstart is going to come out of the blue and render them obsolete.
It has happened in the past with companies like Nokia or Ericsson but that is the risk you take while investing.
Also, when you invest in companies from the US, you take advantage of the dollar rise against the rupee as well. Typically, we see the dollar rise by about 3-5% per annum on average against the Indian rupee.
This is going to be added to your returns without you having to lift a finger and so that is something to be seriously considered as well.
The world is connected tighter than ever and even though there may be resistance to this movement, we don’t think it is going to be successful in stopping globalization in the long run. Having a finger or two in the tech titans of the world could be very profitable indeed.