15% or 50% abroad? How much should you invest?
Why it matters How much should you allocate? Before you continue reading How financially free are you? Most people overestimate their financial freedom. Discover your
Why it matters How much should you allocate? Before you continue reading How financially free are you? Most people overestimate their financial freedom. Discover your Financial Freedom score through a quick survey Calculate My Score The theme-chasing trap Active or passive: keep it simple Routes and limits A sensible addition For a long time, global investing was seen as a niche pursuit in India, relevant mainly for high net-worth individuals (HNIs). That has changed. With mutual funds offering global investment products, GIFT City opening up as an investment route, and the LRS (Liberalised Remittance Scheme) window well established, an Indian investor today can build genuine exposure to global markets. The question is no longer whether to invest globally, but how much.The core argument for global investing is di versification. An Indian equity portfolio is a bet on one economy, one currency, and a spe cific mix of sectors. Global investing should not be viewed as a substitute for investing in India. Rather, it should complement an Indian portfolio. The objective is not to shift wealth away from India but to diversify across economies, sectors and currencies.There is a currency angle as well. Over long periods, the rupee has depreciated against the United States dollar. This is not a prediction or a view; it is simply the histori cal pattern. When an Indian investor holds a dollar-denominated asset, rupee deprecia tion adds to returns in rupee terms, over and above what the underlying asset itself delivers. It works as a quiet, structural tail wind for the global portion of a portfolio. For example, if a global investment generates an annual return of 8% in dollar terms and the rupee depreciates by around 3% over the same period, the investor’s return in rupee terms becomes higher, subject, of course, to exchange rate fluctuations.This is where the debate gets noisy.
Different advisers and asset managers put out very different numbers. Some recommend al locating 15% of the equity portfolio to global assets as a diversification sleeve. Others go so far as to suggest 50%, treating Indian and global equity as near-equal legs of the port folio. Neither number, on its own, is wrong or right—the appropriate figure depends on the investor’s risk appetite, and there ought to be a logical basis for it, not just a round number picked because it sounds balanced.Note where the aggressive bucket lands— well short of the 50% some commentators suggest. The reasoning is straightforward: India is currently the fastest-growing major economy in the world. An aggressive inves tor is someone seeking growth, and a large part of that growth opportunity is sitting at home. Recommending that such an investor park half the portfolio abroad needs a strong justification. Unless there is a specific case for a particular global market or theme, a 50% allocation looks more like a talking point than a considered strategy. A lower fig ure, in the 20-25% range, is more defensible for most aggressive investors, with the balance continuing to ride India’s growth story.The nation continues to enjoy favourable long-term structural drivers that support growth: a young population, increasing for malisation of the economy, rising consump tion, infrastructure investment, manufac turing growth and digital adoption. It is also widely expected to remain the fastest-grow ing major economy for the foreseeable future.One risk that deserves specific mention is theme-based global investing. Artificial intelligence (AI) and semiconductor-linked stocks have had a strong run globally over the past couple of years, and a fair number of Indian investors have chased this trend through thematic international funds.
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