The 4 Biggest Myths of International Investing
2 minutes read
Global brands such as Netflix and Amazon are common household names in India. We regularly use Apple and Google products and interact on Facebook and Twitter. But when it comes to investing, we default to domestic markets. For most of us, global investing is still an enigma because of the lack of awareness or myths. In this article, we try to debunk a few common global investing misconceptions.
Debunking Top Myths of International Investing
Myth #1: International investing is too risky
Reality: There’s always a risk involved in equity investments, be it domestic or international. It is a misconception, however, that domestic market investing is safer in general. On the contrary, stock markets in developed countries are typically less volatile than those in emerging ones. This phenomenon is known as home bias, where investors prefer to invest in their home country while overestimating the risk of investing abroad.
Investors should instead look at diversifying a part of their portfolio overseas. The low correlation between the Indian and US stock markets also reduces the overall risk of the portfolio.
Myth #2: Only the rich can invest overseas
Reality: Not true anymore. Under RBI’s Liberalized Remittance Scheme, every Indian resident can remit up to $250,000 overseas per year. With Winvesta, you can open your US brokerage account in 15 minutes with zero joining fee and start investing today. You also do not need to invest thousands of dollars in stocks like Facebook, Amazon, Apple, or Tesla. With fractional shares, you can invest as little as $1 in your favored stocks and own a part of the stock. Fractional shares allow you to invest small amounts in high priced foreign securities. Also, it helps you select from a broader set of investment opportunities and diversify your portfolio even with limited capital.
You can read more about fractional shares here: /blog/fractional-shares/.
Myth #3: You have to lock your money away
Reality: If you hold your investments longer, you can smooth out short-term bumps and possibly make better returns. However, you are certainly not locking away your money. In fact, the US stock market is the most liquid in the world. You can liquidate your investments with virtually zero bid/offer spreads during market hours. For most securities, cash settlement is the trade date plus two working days, i.e., T+2. Withdrawing the money back to India or a foreign bank account takes 1-4 days. Thus, investing in foreign equities doesn’t mean the money is locked and inaccessible.
Myth #4: You need to be a US stock market expert
Reality: It is a common misconception among new investors. While a strong knowledge of the US stock market is welcome, it is not compulsory. There is ample information available online to help you make an informed choice. At Winvesta, we offer multiple resources to help you gain knowledge in US stock investing:
- Analyst Ratings: to help you make an informed investment decision.
Analyst ratings are a measure of the expected performance of a stock in a given time period. Analysts issue the ratings as Buy, Overweight, Hold, and Sell
- Winvesta Crips: Crisps is a daily newsletter that gives an overview of US markets. It includes market snapshots, detailed analysis of relevant news, other important news, and economic/earnings events for the day.
- Key stats of the company and price charts are included on the trading screens of the app.
- Blogs and webinars to learn about overseas investing and personal portfolio management
You may also consult with your financial advisor before making an investment decision.
“Investing in international securities is expensive and tedious” is a myth. It’s not true anymore. Building a truly global portfolio is now well within reach of most Indian investors. With RBI’s Liberalized Remittance Scheme and Winvesta’s secure and affordable platform, opening an international investment account takes just a few minutes with no minimum capital.
Contributed by Prateek Jain
He is the Co-founder & President of Winvesta. Before Winvesta, Prateek worked at Deutsche Bank for 11 years