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Global Investing

Global investing is the buzz word today. Every magazine, TV channel, website is talking about the merits of diversification and why we should not be keeping all our money parked with Mother India.

Now as usual I am always wary of anything that is the flavor of the season. Hell I don’t even eat the most popular dishes in a buffet (recycled in most of the cases, so).

So any ways the logic being given is that if your entire portfolio is invested in India and if Indian markets or economy collapses you do not have any cushion for the same. So one must invest abroad in foreign markets like Europe, US, China etc, not that government of India allows retail investors to invest abroad upto 200000 US dollars per annum or some other big amount!

My first question is how many people in India have that kind of money to be invested abroad? Surely it is some kind of scheme that our politicians have come up with to launder their ill gotten money.

Here is how it must be working

  1. Corrupt neta shows that he has got some money in form of agriculture income (Ever wondered how all our politicians love to call them son of soils).
  2. This tax free money is invested abroad in some tax haven. More money is pumped out through havala. Now suddenly the money invested by our neta makes a lot of return outside of India and is brought back to India in form of income in USD, again tax free.
  3. Suddenly the black money is white and we can file our IT return and our money becomes legal.
  4. IT is again invested in property etc.

But is investing outside of India a good move?

I think not. Given below are my reasons:

  1. The amount of money most of us have to invest does not make sense to take it outside of India. As the cost of transactions outside India are very high. E.g in US most of brokers will charge almost $5 for even small transactions.
  2. The exchange rate fluctuations can easily wipe your profit out.
  3. Tax treatment of these investments is fairly complex and requires expertise in tax laws of more than one country.

But most of all when the world is coming to India, as they feel India is one of the best markets to invest, I don’t see a reason to go out of India and invest in a country from where capital and jobs and purchasing power is moving out.

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