First, let's understand why you should, at all, consider investing part of your portfolio overseas. Let me tell you a story from history that I lived through, but many of you may not be familiar with - having been too young at that time.
Almost 25 years ago, in 1997-98, every South East Asian Market from Taiwan to Thailand to South Korea to Indonesia fell between 50 to 90% in US Dollar terms in a single year. A phase that went down in history as the Asian Crisis.
The thing to remember is that these were not no-hoper, basket case economies. These were the Asian Tigers. They were inspirational and even India wanted to be an Asian Tiger. Yet, their currency and stock markets collapsed.
More recently, we have seen a similar carnage in Russia, Sri Lanka and to an extent even in Western Europe.
Even when there is no crisis, single stock markets can deliver poor performance for very long. Japan has not reached its 1980s high even after 3 decades. The mighty NASDAQ did not take out its 2000 high till 2015.
Yet, investors all over the world continue to have a disproportionate allocation to their home markets which is both a sub optimal, as well as risky, strategy.
The Indian stock market accounts for approximately 3% of the world's market capitalisation. Why should you have 95% or 100% of your investment portfolio invested only in India, ignoring the rest of the world?
In general, investors should look at diversifying outside home markets as only home market exposure exposes you to SCCARs (Single Country Single Currency Single Asset Risk) which can be a huge blow at times.
Since most of your returns are decided by Asset Allocation, it is imperative to have diversification across geographies and asset classes.
Even if there are no disasters, the risk is real...even in India.
In the mid-80s, when I started working, the US Dollar was Rs.12. Today it is Rs.82+! So, that has been an 85-86% loss in the value of the Indian Rupee over the course of a career.
Earlier, of course, there was no way for an Indian resident investor to get a truly Global exposure. This is no longer the case.
For Indian Investors, there are a few ways to get Global exposure: through the Liberalised Remittance Scheme (LRS) of the RBI as well as Domestic Instruments.
Under this scheme, an Indian resident can invest up to USD 250,000 (about Rs.2 crores) per year per person globally. This is a fairly generous limit.
However, since Indian Investors have historically not been used to investing overseas, there is still considerable confusion and uncertainty about the optimal route to take for Global Investments.
Let us look at some ways to make these Investments and the pros and cons of each:
1. Mutual Fund offerings of Indian houses where all or part of the investments are made in Global ETFs, funds or stocks. These are domestic instruments and don't even use up your LRS limit. However, these have a few constraints, including an overall limit by the RBI on how much can be invested by the entire Mutual Fund Industry, globally.
The other drawback is that it adds another layer of costs & charges by the Domestic Fund house for no additional benefit, whereas you still continue to pay what the overseas ETF manager or fund house charges.
Also, there is no accountability, as the domestic Asset Management Company (AMC) is just a pass through entity. Consequently, it will not be liable to give any explanations for the performance, or lack thereof, of the fund.
The other constraint which is not a built in one, but simply a result of the way things are done is that most Indian offerings are oriented towards only one or two geographies, usually the US and sometimes the China region. They are not truly Global in nature.
A recent example is that a number of NASDAQ offerings came up in 2021 when the NASDAQ was booming, which have since lost substantial money for the investors.
2. Under the LRS scheme, the Indian investor can also directly buy both stocks and mutual fund / ETFs abroad with some constraints like no leverage or derivative positions.
These can be used to buy any ETF or funds. These can include those in Equity Markets as well as those in Fixed Income, Commodities etc. Again, investors looking at these should look beyond only the well-known one or two US indices.
Most of your returns in an investment portfolio come from Asset Allocation and the optimum Asset Allocation does not remain static over a period of time.
Various countries, geographies, asset classes, sectors etc. go ‘out of favour’ in terms of returns. For example, from 2003 to 2007, US markets were a big underperformer whereas the Emerging Market Index went up over four times - India went up 6 times, Brazil went up 10 times.
Then, from 2010 to 2020, the US was a huge Outperformer whereas Emerging Markets did nothing.
Therefore, getting locked into one or two ETFs is not a good idea.
3. The same international brokerage accounts can also be used to buy stocks directly - in at least the Developed Markets. Direct stock purchase access maybe more patchy in Emerging Markets as many brokerage accounts do not provide access to these, although country ETFs are available.
While it is risky to be locked into certain particular country indexes and ETFs, it is even worse to be locked into certain stocks, especially as the life cycle of businesses is getting shorter and shorter in the Developed World.
For context, the NASDAQ did not take out its 2000 high till 2015 and even when it did, the composition was very different! In 2000, Tech majors meant companies like Motorola, Dell, IBM, Cisco etc. whereas now it means a completely different set of stocks.
Plus, at various points other asset classes like Commodities, Fixed Income, Precious Metals, Real Estate Investment Trusts (REITs) etc. become more attractive and the Asset Allocation has to be shifted more towards these. In short, what you need is a dynamic and tactical Asset Allocation system.
4. The learning from all that we have seen about is that an ideal investment portfolio should be diversified across geographies and across asset classes.
And, even this asset allocation cannot remain static over time. It needs to be managed dynamically and tactically by a Fund Manager or Advisor who really understands Global Markets.
Normally, access to this type of truly diversified Asset Allocation portfolios is available only to the very wealthy investors, investing over a million dollars each.
However, at First Global we were determined to provide access to this type of investing to smaller Indian investors.
We have managed to structure and offer a truly geographically diversified multi-asset portfolio, called the Global Multi Asset Allocation Portfolio (GMAAP), starting at USD 10,000 which is approximately INR 8 lakh simply as a service to offer this to smaller investors in India. There is also an Equity ONLY variant which is also totally global.
We also have a similar strategy in a FUND format with starts at $100,000.These instruments invest in Developed Markets & Emerging Market Equities, Commodities, Fixed Income of all kinds, Real Estate Investment Trusts etc.
Both of these are truly global, where we invest in anything from Australian mining companies to South African REITs and everything in between. We reallocate and change strategies as the outlook changes because there is always a simultaneous bull market and bear market in the world depending on which asset class and geography you are looking at.
More on that another time.
From the desk of Devina Mehra
Economists Think Dollar's Fall May Explain the Recent ‘Rally’ by Steve Liesman
Einstein taught us about relativity in nature. Now come Devina Mehra and Shankar Sharma of First Global to teach us about relativity in financial markets -- and raise some serious questions about just what is driving stock prices.
First Global reports are quite credible and, on occasion, more than that.
What prompts this mention is Intel's earnings report and the fact that First Global has had a pretty good bead on the company and its stock.
AMD up again following First Global upgrade to ‘buy’ (AMD) By Tomi Kilgore
Analyst Kuldeep Koul at First Global upgraded Advanced Micro Devices (AMD) to "buy" from "outperform," given the "exceptional traction" that the chipmaker's Opteron line of processors has been able to get.
Baidu Climbs on First Global’s ‘Outperform’ Outlook
Baidu Inc., the operator of China’s most-used Internet search engine, rose to the highest price in two weeks after First Global rated the shares “outperform? in new coverage.
Personality counts: Walmart's frugal, but Target charms
"It's better to take a slight hit on [profit] margins and keep on moving and inventing," says First Global Securities. And at least for now, Target is inventing in a way that appeals to consumers with money to spend.
Dead Batteries
At 11 times trailing earnings, Energizer is cheaper; Gillette's multiple is 25. But cheaper doesn't mean better, says First Global.
Bipinchandra Dugam @bipinchandra90
@devinamehra @firtglobalsec
invested in both GFF-GTS and Super I50. Thank you very much for such wonderful investing experience with completely new approach. In my 15years of investing first product I felt which close to what customer want.
Shishir Kapadia @shishirkapadia1
@firstglobalsec @devinamehra
by far you are the best, I have not come across transparency, acumen, global expertise, exposure, protection of capital, delivering return from any fund/ fund managers. Invested very small size in 3 products will keep on increasing it over the period
Piyush Bhargava @PiyushB88762654
@devinamehra @firstglobalsec
Thanks you team FG specially Devina, my investment doubled in less than 3 years in SDPB As a investors & PMS distributor of your product looking to have a long-term relationship with the company.
@KarmathNaveen the person with whom I always interact
Sumeet Goel @GoelSumeet
Very happy & relaxed to be invested with first global pms
Shishir Kapadia@shishirkapadia1
Congratulations on super performance, above all transparency and systematic process are unmatchable.
One must opt this, if person consider him/her self as an investor. Very happy to be part of this since invested. FG has managed worst year (ie 2022) so efficiently and skillfully.
SY @SachinY95185924
With so much of volatility in the market, risk management is very important part & considering that FG is doing awesome work!!! Kudos to you Chief
Amit Shukla @amitTalksHere
Truly outstanding. As a retail subscriber to #fghum #smallcase, I can vouch for the Nifty beating returns (8% vs 3%) in last 1 year. Keep up the awesome work @firstglobalsec
We can load above testimonials on site as a scroller, and just below that we can add a section for compliments . Below tweets are comments and praises are related to our content, performance and some our direct compliments to you.
ADIT PATEL @ADITPAT11226924
Good team...
Special mention @KarmathNaveen .. he is soo helpful anytime of the day or night..
Hindustani @highmettle
Bought Peace with FG-Hum.Moving all funds from DIY investing to well managed and diversified PF at low cost.
It has doubled almost, excellent pick.Every small investor must invest in her FG-HUM Smallcase.
Suresh Nair @Suresh_Nair_23
I have 8 small cases and your has been the most rewarding ones .. thank you Devina.
Sayed Masood @SayedM375
There is absolutely no doubt that she is one of the best investors of India in modern times but more importantly, she shares the most sincere and sane advice with retail investors.
SY @SachinY95185924
Wow Superb Returns🔥 Congratulations Chief for being Number 1 among all PMS!!!
You are one of the sharpest mind in Global Stock Market
AnupamM @moitraanupam
Congratulations Devina, results talk in itself!
Abhishek @simplyabhi21
Congratulations ma’am @devinamehra ! The consistency you have in maintaining the top rank position is outstanding! 👏
Mihir Shah @Mihir41Shah
We are learning More about markets (& Life ) thanks to U than we learnt in our Professional courses.A BIg Thank You, Wish all get Teachers Like You!!
Sumit Sharma @MediaSumit
"The ability to be comfortable with being outside consensus is a superpower in investing...and in life." Devina ji hits the nail on its head!
Majid Ahamed @MajidAhamed1
Congratulations @devinamehra mam! All the best for long term returns as well.
Vinay Kumar @VinayKu05949123
This is the wonderful session I have ever attended till date. One of the most fruitful hour of my life. Devina madam, ur clarity on financial mkts is simply superb.The way u portray the facts supported by "data" about stock mkts is really astonishing.I will listen again.Thanks.
VIJAY @drippingashes
I loved to read your journey, insight and philosophy. It's a pleasure to read and know of your takes on market and life.
MNC🏹 @Focus_SME
Check & follow @devinamehra's timeline for lots of post debunking such rosy stories. Also, she gives amazing 🤩 sector directions/hints.
KLN Murthy @KLNMurthy2016
Good actionable insights, great article!
Suresh Nair @gkumarsuresh
Devina Madam is simply terrific... good knowledge, straight and simple thinking.
Very difficult to emulate such traits. I listen her past interviews from youtube.
Respect...!!!!
DD @AliensDelight
One of the brightest minds in the world of finance :)
Radhakrishnan Chonat @RCxNair
📣 Calling all investors! Just had an incredible interview with @devinamehra, Chairperson and MD of First Global. We discussed the importance of global diversification, effective asset allocation, and the risks of sitting on the sidelines. Trust me, you don't want to miss this!
siddarthmohta @siddarthmohta
Excellent performance. Flexibility is the key as you have mentioned it earlier also. Cannot have finite rules for infinite mkt opportunities.
Boom (বুম)@Booombaastic
To be honest, the insights which Devina madam brings in is very enriching..have learnt a lot from them...
Himanssh Kukreja @Himansh02428907
One of the most accurate analysts :)
I always look forward to you interviews mam
Abhijeet Deshpande @AbhijeetD2018
Madam, It is always a treat to read your insight, not only on business but on other topics also!!
Dada.AI @dada_on_twit
Thanks for this wisdom ma'am. Always love hearing your thoughts on everything equity. :-)
adil @zinndadil
Excellent points!
Can clearly feel this thread is a product of marination of many books and years of experience. 👍
Kamal thakur @Kamalgt10
Superb !!
Your knowledge, analysis & articulation is simply great 👍
Tanay @Tanay36232730
Follower on Twitter and Subsciber on YouTube of First Global, really helping me in my investment desicion. Thanks
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