Global Investing via Feeder Funds and LRS

India's equity markets have delivered exceptional returns, but limiting your portfolio to a single country is a form of concentration risk. Global diversification — particularly exposure to the US market — can improve your portfolio's risk-adjusted returns over time.

Two Ways to Invest Globally from India

Indian investors have two main routes to global markets: Feeder Funds (international mutual funds investing in overseas markets) and the Liberalised Remittance Scheme (LRS), which allows direct investment in foreign securities up to USD 250,000 per financial year.

Feeder Funds: The Simpler Route

International or feeder funds are Indian mutual funds that invest in overseas mutual funds or ETFs. You invest in Indian rupees, the fund handles currency conversion, and you benefit from global market exposure. Examples include funds tracking the S&P 500, Nasdaq 100, or global indices. The main advantage is simplicity — no foreign account needed.

LRS Route: For Direct Investors

Under RBI's LRS, you can remit up to USD 250,000 per financial year to invest directly in foreign stocks, ETFs, or bonds. This route requires a foreign brokerage account and involves more complexity — including FEMA compliance, foreign tax filing, and managing currency risk.

Tax Treatment of Global Investments

For feeder funds held over 24 months, gains are taxed as long-term capital gains at 20% with indexation. For LRS investments, dividends are taxed at your income tax slab rate, and capital gains depend on the holding period. Tax treaties (DTAA) between India and the investment country may provide relief from double taxation.

Currency Risk: The Invisible Factor

When you invest globally, you're also taking on currency risk. If the INR strengthens against the USD, your returns in rupee terms are reduced. If INR weakens (as it historically has), your returns are amplified. Over long periods, INR depreciation has historically added to returns from USD-denominated investments.

Getting Started with SOSM

SOSM's global investing service helps you navigate both routes — recommending appropriate international funds based on your risk profile, or guiding you through LRS setup with full regulatory compliance.