https://youtu.be/fsdWVnQyjcY Transcript [00:00:15.250] - Darshan Doshi Hi everyone. Welcome back to Swatantra. I have with me my partner, podcast partner Jaydeep Doshi from Proinvest Nirmiti and I am Darshan from Dasar. At Swatantra what we aim to do is to simplify investing so that you can be financially independent by investing at the right time, with the right knowledge, with the right partners. So today what we are going to do is we are going to talk about global investing. And this is a topic which is of very high interest to me personally. And so I'm going to ask a lot of questions to you Jaydeep, which are kind of very relevant to me and many of the people that I know and I'm talking to today. So quickly, what is global investing? I am an Indian citizen living in India, working at a job, earning money and now wanting to invest in the US market, the European market, or Australian market, right? But I don't know how to do this. I don't know what this means from a taxation standpoint. Am I even allowed to do this? How would I do this? How would I choose? How would I research stocks and then why would I do this? So we want to cover all of these topics in this podcast today and we are going to simplify global investing as an Indian citizen living in India. So the first and the most basic question, why should anyone invest in global stock markets when you have sensex, when you have Nifty 50 doing so well? [00:01:52.670] - Jaydeep Doshi Yeah, so I mean, first thing is, while investing, the basic rule is to not have any kind of biases. So first thing is, whether you're in India or you're in the US, you must always consider the right investment opportunity for you. India being just 3% of global GDP, there's like immense opportunities globally. There are a lot of listed companies who are trading and doing very well. To give an example, everyone of us use Amazon, we use Netflix and company and directly-indirectly we know that we are going to be associated with them for the years to come. And I think why shouldn't we think of these businesses also, india being a developing market, we should also, as a part of diversification, have some exposure to developed countries also where there's more transparency, data is more efficient and information flow is more transparent over there or at the same time everybody gets the information. So it makes a lot of sense in terms of diversification and identifying good business and investing in them and having no biases also. [00:03:01.500] - Darshan Doshi Okay, so basically, if I am investing Rs 1000 anywhere in any instrument, as an investor, I'm trying to maximize my returns. At the same time, I don't want to lose that Rs 1000 that I have earned by working hard. And so diversification portfolio management becomes important and this is where maybe we can even discover some great businesses like Amazon, like Apple, like Netflix, although it has taken a bit of a beating recently. So, okay, what are my options? I want to invest abroad outside India. What are the best places and what are the various options that I have to invest globally? [00:03:49.210] - Jaydeep Doshi So the most common or most easy option these days is investing in the US markets. So Motilal Oswani way back in 2009 had introduced NASDAQ 100 ETF. And as you know, the last decade has been for the developing countries, developed countries like US. And they've done better than the emerging countries or developing countries like India. And we have these ETFs which we can buy through mutual funds. We can buy stocks also now and buy them in fractions. We can buy an Indian mutual fund which has small part of it invested only in the global market. It's more to do for the taxation purpose. So, yeah, we have these ETFs, we can buy stocks, we can buy infractions. And this is all about these are the options that we have. But most options that we have are directed are more for the US markets. And we don't really have a lot of choices to buy individual stocks globally. Or say like a company trading in. Japan or Europe or China or something like that. So US is primarily very easily available. [00:05:05.860] - Darshan Doshi Yeah. So two questions as a follow-up to that, one is if I'm investing in the US stock market, you have the NASDAQ 100, similar to say, the NIFTY 50 equivalent. What are some of the returns that from a percentage point, from a number standpoint, if you can throw some numbers over the last 5,10, 15 years, whatever the period may be. And the second thing is, how does it actually work? So today, if I want to invest in any of the mutual funds or any of the direct stocks in India, I just go on Zerodha there, I go on ICICI Direct, I use HDFC. If I had to actually go, what are the platforms that I should be looking at and are trustworthy for me to be able to invest in the US market? [00:05:57.460] - Jaydeep Doshi Okay, so if you are asking me about trust, it's really difficult sitting here and talking about anybody in particular because finally we all are tying up with some broker on the other in US and US declaring bankruptcy. And it's quite different than the way it works in India. But I would say you could partner with people like HDFC, Kotak or even Stockal who are pioneers in setting up their own platform associating or tying up with a broker in the US. Everything is in the name of if you have to buy individual stocks, you can open an account which is dollar denominated and invest also globally. In your first question where you asked about the performances and all, so it actually varies from time to time, but last decade definitely has been for the US. Because the US markets have done exceptionally well, all the tech giants. NASDAQ 100 is typically the technology index. So that has been exceptionally well and has outperformed all indexes, especially in India. If you are investing in India and that's why when I said why you should be investing is for one of the reason is diversification because everything is not in India and God forbid, if something goes wrong to our story, you should have a plan B and diversification will get down some kind of risk. So I have my investing experience and where I had started an SIP in one of the mutual funds and I realized that in 2019, maybe till date, the performance is quite better than doing an investment in Indian stock market. So the weights have been rational. But yes, from the diversification point of view it makes more sense. [00:07:42.080] - Darshan Doshi Yeah, I mean, as an investor I just want to maximize my returns, right? But not at the point where I lose my money. And so that's where the act of balancing is very important. So thanks for giving us how we could invest as an Indian abroad or specifically the US market. I also want to understand the downside of investing globally. So I'm sure there are pros, you've mentioned a lot about the pros, but what are the downsides and why should you not invest in the US market? [00:08:17.710] - Jaydeep Doshi Yeah, I mean, downside is typically an equity risk that you're carrying what is true for Indian markets also. But one of the example is recently, had you invested in Turkey at this point of time and for some political changes that have happened in the country, the currency is divided almost about 45-50%. So these are the risks that you carry when you invest globally. So you should not just do it for the fun sake or maybe most of the investors look at the past track record and get into these markets. These are highly injurious things to do. Just from a long-term perspective, because when I started investing in developed market, the return expectations were as low as 8 to 9%. And my objective was to do well when probably if India doesn't do well. So you should have this written expectation set correctly. It surprised me for sure that the kind of returns the developed markets have generated over the last decade. But I shouldn't presume that the same is going to happen in the next decade as well. So don't look at the past returns. Don't just do it for any kind of just because others are doing it. And the way I do it is every area, supposedly I'm investing, say about 10 Lakh rupees in India, then 10% of that has to go to global investing. I have to do it consistently. It's not about investing in 2020-21. You have to keep doing it and keep balancing the ratios. [00:09:51.160] - Darshan Doshi Yeah, it's not a one-and-done thing. Personal finance, I think one of the things that we say is consistency over intensity. Be at it. Manage your money, manage your investments. Give it the due time. Spend an hour to two hours. Even if you are working at a very heavy job, I think that is very important. And you have to level up your knowledge and you are doing that. So maybe what you could do, you talked about a very important part, which is currency devaluation. But at the same time in India, the rupee has been going down. So now a dollar costs about Rs 77 or Rs 78. And so that can actually work in your favor if you are invested abroad, correct? But help me understand, what are the benefits of this? What is this exactly? When you say Stockal, you're investing in dollar denomination, right? For those who may not know. [00:10:46.300] - Jaydeep Doshi Yeah so it's like when you are investing, transferring, say about $3,000 today, buying about $3,000 at Rs 75 and probably you're going to sell this stock, assume that you sell it after three years and the general history of Indian currencies that we have been developing at devaluating our currency somewhere in the range of about 3%-4%. So next time, when you go and sell over and above the returns that you have generated in the US, you would also, while you are selling your stocks, if the currency is somewhere around Rs 80, Rs 5 is the additional advantage that you carry by sitting in India and investing in the US. So it's an advantage for one who sits in India and invests in US. But if somebody's doing the other way, we meet a lot of plants who are in the US, who are in maybe Singapore, and they want to invest in India, so they are transferring dollars. So for them, it works in the reverse way. So their returns, when we calculate, have to be exactly the opposite way. So they are losing money due to the devaluation. [00:11:59.830] - Darshan Doshi Yeah. In the SaaS, that is Software as a service business, one of the things that we talk about in the startup world is it's easier to earn in dollars than in rupees. But it's also better to earn in dollars than in rupees because of the currency devaluation that we've been seeing. If you follow Manish Chokhani on Twitter, he's been talking a lot about why India needs to use its reserves to avoid currency devaluation. I mean, we're not going to talk about that. That's a whole different topic podcast altogether. But in this case, I'm just summing up what you said that if you invest as an Indian in US dollars in the US market and three years later, if the rupee has become, say, one dollars cost Rs 85, you would have already made some amount of returns just over and above the returns that the company might have given as an investment. So this is great. We've kind of covered why is global investing important from a diversification standpoint? Why is it not important, what are the options? How do I invest globally sitting in India, why should I really? What money can be made? My next question is around taxes and actually you can't just ship money outside India, right? There are rules and regulations around it. The Reserve Bank of India takes care that you're not doing round tripping or some of the other things which may be illegal in nature. So there are some rules and regulations around this. So just help me understand if I wanted to invest, can I invest any amount of money abroad? If so, what are the limitations? And once I have invested, what are the things that I need to keep in mind or the things that I should talk to my CA and especially taxation? What do you think about it? So it's a very broad question but whatever you could help. [00:14:11.650] - Jaydeep Doshi I'll start with the taxation part. So basically, what are dividends you own in US, about 25% is directed at source in India and the same can be claimed back when you file your returns considering your tax slab. Other than that, if you are buying individual stocks the taxation is different from buying a mutual fund or US fund or fund. If you buy individual stocks and you hold it for two years it is considered as long term. It will go under the long-term capital gain. If you sell it within two years, it's considered as short-term. Any gains over and above after selling a stock after two years you will be taxed at 20% if you are buying individual stocks and if it's again realized within less than two years then it is as per your income slab. If you invest via mutual funds which is investing more than 65% of the AUM in global stocks, then you need to hold it for three years to be called as long term capital gain and after three years you can even claim indexation benefit on that. And if you sell it in lesser time in less than three years, then it's short term capital gain tax and tax as per your income slab. So broadly, if you ask me, it's more convenient for anybody to buy mutual funds or ETFs there because of the clean taxation and easy to understand. If you buy stocks, there are additional costs over and above the brokerages that you pay because the bank will charge you a few dollars for every remittance that you do. In a year we are allowed to transfer about two and a half we can remit about two and a half lakh dollars but any remittance over and above $7,000 banks will charge TCS that will deduct tax at 5% which again your CA will have to claim it in case if you're not able to pay any taxes for those transactions. So when you buy individual stocks it's a bit complicated beyond $7,000 because the tax has to be claimed. A lot of them file their returns on their own. So it may be a little complicated. Also, from the cost perspective, ETF cost fewer, very less. And if you see global, especially in the developed markets, investors have been saying that ETFs will outperform everybody in the long run. So it's advisable that or I would consider investing in ETFs to keep my taxation simplified and also getting the diversification benefit. [00:17:13.190] - Darshan Doshi Yeah, but I think first is I want to put a disclaimer. You have to take your own decisions, and this is not financial advice. You have to take control of your own money, of your own decisions on investing. We are here to educate and bring awareness to you, but ultimately you have to take control of your money. And so I just wanted to put that disclaimer because we are providing to be supportive and yet be put at a gunpoint down the line. That apart, this is what I hear from this podcast. Global investing, great way for us to diversify our investments. Take the benefit of the US dollar to Indian rupee conversion, currency conversion, and some arbitrage around there, over and above the returns that you could get from great stocks or mutual funds or ETFs that they might give us. Third is, keep in mind the taxation slabs. Keep in mind, keep your CA in the loop if you are investing in any international mutual fund or indirect or direct stocks which are outside based out of India. And lastly, keep a watch on the total amount of money that you are actually making for international investments, it should not cross $250,000 per year, per year. And in a single transaction, if you do more than $7500, then there's a deduction, which is TCS, which you can claim back depending on working with your CA. [00:19:02.750] - Jaydeep Doshi Annually remittance above $7500 is 5% TCS. TCS will be deducted. So supposing you're doing about $10,000, then you would actually have to transfer ten lakh rupees, then it would be Rs 10,50,000. That would be the cost to you, because 50,000 will be the TCS, which you'll see we'll have to take care. [00:19:22.330] - Darshan Doshi Correct. And so this has been an awesome podcast, Jaydeep. Global Investing, I think I'm a big believer that we should invest in stocks of the products that you use. Today, I love Apple, I'm a massive Apple user. I have the iPhone, I have the Mac, I use Netflix and then I use Amazon so these are like no brainers. [00:19:51.210] - Jaydeep Doshi Also, now, the lithium battery ETF, we don't have any company which is manufacturing lithium or mining lithium in India. So such ETFs are also very convenient for us to buy in terms of diversification and also people who have matured and have been investing already in Indian markets for a long time and I have a sizable portfolio, definitely adding these kind of ETFs and products which are not available makes a lot of sense. [00:20:15.840] - Darshan Doshi Brilliant. So this is a short and to-the-point podcast about how you can get started with global investing. Jaydeep has demystified it. He has helped us really break it down, broken it down in terms of how you could invest and how you can get started today. You can take the benefit of this and all the other podcasts where at Swatantra we have tried to simplify investing which would involve sector analysis with Rushabh, we have looked at with Jaydeep on a bunch of things, Real Estate versus REIT. How can you research, how can you choose? How can you invest in such vehicles? Going forward, what you can expect from us is even more deep dives on sectors, on individual companies, as well as some macro trends or some things that might be happening in the financial world. So stay tuned. Subscribe to this channel. Take a look at our transcripts on our website and if you think there are any topics that you really want us to talk about, that you want Jaydeep or Rushabh to cover, just drop us a comment. And if you benefited out of this, please share it with your friends and family. If we can have more people be aware of how to invest, how to do things themselves, or make sure that you're not losing money based on some Twitter tips. You need to be in control of your own money. And that is what we want every single person, every single audience member to take away from this. None of the things that we talk about are to be considered as financial advice. Take your own decisions, be in charge of your own money. That is the golden rule that we want you to take away from this. And tune in for the next podcast on Friday. Thanks a lot. If you liked this podcast, you may also want to listen to: * Decoding the Indian Fund Management Industry | Mandar Mhatre | Investing | Personal Finance | Wealth | Stock Market * Gaining Financial Independence | Darshan Doshi | Personal Finance | Financial Freedom | Optionality | Career | Wealth * Why You Should Manage Your Own Money * D2C Brands | Creating #1 Consumer Food Brand | Ravi Nigam | Tasty Bite | IPO | M&A * Building Enterprise Tech Products | Shridhar Shukla | SaaS | kPoint | Video Analytics | Tech Services vs Products | DASAR * Building Billion Dollar SaaS Companies | Monish Darda | ICERTIS | Contract Lifecycle Management | Culture | Bikes

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