Finally, you have decided to make overseas investments to strengthen your portfolio and reduce the impact of volatility and currency depreciation. Now, the most important question is how much of your total investment portfolio you should allocate to overseas investments. There is no fixed rule, but most financial experts believe that keeping around 10% to 30% of your portfolio in international investments can be a balanced approach.
The first thing to decide is how much of your portfolio you want to allocate to overseas investments while staying within the RBI guidelines. Under the current Liberalized Remittance Scheme (LRS), an individual can remit up to USD 250,000 abroad during each financial year. You can use this amount to invest in global markets, whether the U.S., China, or any other international market.
The maximum limit under the Liberalized Remittance Scheme is USD 250,000 per year, and I believe this limit is more than sufficient for the vast majority of individual investors in India.
If you are just beginning, you do not need to invest the full amount right away. Start small, understand how overseas investing works, and gradually increase your exposure. Like any investment, there are risks.
The first is currency risk. Many investors choose overseas investments to protect against rupee depreciation, but currencies can move in both directions. If the rupee strengthens against the dollar, it can reduce your returns when converted back into Indian rupees.
The second is access to information. If you live in India, you naturally have better access to information about Indian companies and markets. When investing overseas, you may not have the same level of access. Therefore, it is important to stay informed about global economic trends, geopolitical developments, interest rates, and other factors that may affect your investments.
Although investing abroad has become much easier through the LRS, success is not just about transferring money overseas. Whether you invest in stocks, ETFs, gold, or other assets, you need to understand what you are investing in and the risks involved.
Remember, building wealth is a long-term journey, not a one-time decision. Your overseas allocation should match your knowledge, risk tolerance, and your ability to understand global markets. Start with a small allocation, keep learning, and gradually increase your investment as you become more comfortable.
