Quick Summary
Points to ponder while investing in equity
1. Do you travel to foreign countries like the US, UK, Japan, Switzerland, etc.?
2. Do you send your kids abroad for education?
Then, shouldn't you balance your equity exposure to Indian and Foreign stocks/ Mutual Funds/ ETFs?
Reasons for the globally diversified equity portfolio
1. Reduces country-specific risk
Country specific risk includes negative events such as
- war,
- drought,
- political turmoil, etc.
2. Winners keep rotating
- Winners keep rotating frequently
- Predicting them in advance is impossible
- Reduce the risk of our investors losing out when the Indian stock market underperforms
3. Reducing Portfolio Volatility
- All stock markets do not always move at the same pace or same direction
- Investing across countries helps to reduce the volatility of the portfolio
- Lower fluctuations in the portfolio which also helps in better good night's sleep
4. Wider choice
- Several world-class companies do not have listed Indian subsidiaries
- Innovative companies making certain products/ services having no Indian substitute
- Chance to benefit from the performance of global leaders
5. Valuations
- The Indian subsidiary of a multinational company may be highly valued hence less investment-worthy
- The parent company may be available at a reasonable valuation
The author is the Founder and Catalyst at Aaditya Chhajed Financial Services and can also be reached at aadityachhajed@acfas.in
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