Buy shares in foreign company by Indian investors

How can an Indian investor buy shares in foreign company

Today I have got one mail on how can Indian investor buy shares in foreign market. Very often investors ask us how they can invest in foreign market in point of views of portfolio diversification. So here in this post I am sharing the same post which I have read.

Open a trading account

Like you open a trading account here in India with a broking company to invest in shares listed on NSE or BSE or any other stock exchange, you are required to follow a similar process to open a trading account with an Indian broking house to invest in shares of some foreign companies listed on the stock exchanges of their respective countries.
How do I open a trading account to invest in International Capital Markets?
To facilitate you to do the same, an Indian stock broker enters into a tie-up with a foreign broking partner who has the license to act as an intermediary and execute the trades on your behalf in the foreign markets.The Indian stock broker will act as an introducing intermediary between you and the foreign broking house. The Indian stock broker will also help you in getting your account opened and completing the formalities of Know Your Customer (KYC) applicable for that country.
You just need to fill an application form and provide your identity proof such as passport or PAN card and residential address proof such as Voters ID card or latest bank statement as the documents required to open an account.Once your necessary details are registered, you will be provided the bank account details of the foreign broker to which funds are to be transferred. You will also get the contact details of the account executive who will take care of your account in case you require any kind of assistance.

Funds Transfer – Pay-In/Pay-Out Process

As per the remittance norms of the Reserve Bank of India (RBI), an Indian citizen can remit a maximum of USD 2,00,000 in a financial year, from any of the authorised banks in India, including for investments in international capital markets.To remit funds to the foreign broker’s bank account, you will be required to visit your bank branch, duly fill FormA2 and submit it there along with your PAN card copy.
The foreign brokers accept funds originating from your bank account only and will reject any third party fund transfer. Also, they do not accept bankers drafts, cheques or cash deposits either.To get your money back, you need to fill “Bank Transfer Request” (BTR) form online and send it to the foreign broker. Once the payout request is acknowledged, the amount will be credited to your bank account.
It takes around 24 to 48 hours to remit money from your bank account to your trading account with the foreign broker and around 48 to 72 hours from your trading account to your bank account.You may remit funds in one of the many global currencies from your bank account to your trading account but you need to decide the base currency in which you want to settle your transactions. So, if you set USD as the base currency in your account, then all stock exchanges which accept payments in USD will settle your transactions in USD automatically.
For your trades on other exchanges, which do not accept payments in USD, the foreign broker will convert your base currency, USD in this case, to the currency of that exchange at the market rate to execute the transaction. Once your account is opened and funds are transferred, you will be provided a client Login ID and password to have an immediate access to the foreign broker’s trading platform to buy and sell shares of the listed foreign companies. All dealings like trading, delivery of shares/funds etc. will be done directly with the foreign broker without any involvement of the Indian stock broker.

Demat Account

Unlike here in the domestic markets, where your bought shares get transferred into your demat account in T+2 days, when you buy shares in the foreign markets the shares remain in a pool account with the broker’s custodian but start reflecting in your trading account immediately after buying.
Unlike with most Indian brokers, margin trading and short selling will not be allowed with a foreign broker. You will be able to buy shares only when there is sufficient cash in your account and sell shares only when you already hold them.
You can have the access to all your transactions, account history and ledger balance on the trading platform. You will also get the contract notes for your executed trades in your mailbox.

Which brokers are providing this facility here in India?

Only a few Indian broking companies like Kotak Securities, ICICI Direct, India Infoline, Reliance Money and Religare, are offering these trading services to Indian investors.
In 2007, ICICI Securities became the first company to have a tie-up with US-based broking firm, Penson Financial Services, for its overseas trading platform with access to NYSE Euronext and Nasdaq.
While Kotak Securities has a strategic agreement with Singapore’s Saxo Capital Markets, the capital markets arm of Denmark-based Saxo Bank, India Infoline has such relationship with US-based Interactive Brokers,LLC. Reliance Money also has such an arrangement with US-based optionsXpress. Kotak Securities provides access to 24 international stock exchanges through its trading platform “Kotak Trader”. These exchanges cover all the big markets and almost all the big stock exchanges including New York Stock Exchange (NYSE), Nasdaq, London Stock Exchange (LSE), Australian Stock Exchange (ASX), Hong Kong Stock Exchange (HKEX) and Singapore Exchange (SGX) among others. Here is the link to check the markets you can trade in with Kotak Trader.
You can transact on over 80 international stock exchanges with India Infoline whereas, ICICI Securities and Reliance Money facilitate you to transact only in the US markets.
Kotak Trader offers trading in equity markets, ETFs, ADRs, GDRs and REITs through 100% cash and carry system. But, this service is available only for individuals. Partnership firms, HUFs, trusts, NRIs, corporates etc. are not allowed to open an account with Kotak Securities for their overseas investments.
Different companies require different minimum amount to open a trading account. Kotak Securities require you to make an initial deposit of USD 10,000 or INR 5,00,000, whichever is higher, within a period of 3 months from the date of account opening. With India Infoline also, this amount is USD 10,000 but ICICI Direct and Reliance Money allow you to trade with a minimum initial deposit of USD 1,000.
Kotak Securities charges Rs. 750 to open such an account and 0.75% of the trade value as the brokerage, while ICICI has an account opening fee of Rs. 999 and the transaction charges of USD 9 or 0.75% of the trade value, whichever is higher. India Infoline does not have any account opening charges.
As your overseas investments will be made in some foreign currency, your investment gain or loss will also be linked to the movement of that currency. So, if you invest in some stocks in USD and USD appreciates in value, then it would add to your gains or lower your losses. e.g. Suppose you paid Rs. 50 per USD at the time of investment and liquidate your investment when the USD appreciates to Rs. 55, you will get back Rs. 55 per USD.

The process of transacting in equity markets overseas is not that complicated, but you need to understand the dynamics of global equities. You can understand the revenue sources for Bharti Airtel in India but it is difficult to do so for SingTel in Singapore.

(This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in  )

If you have any query regarding investment please feel free to ask.

 Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Prepation for after retirement

How to prepare Retirement Plan

In previous blog, we have discussed about the importance of retirement planning as the changing social and economic scenario. Today we will discuss how we should prepare retirement plan and what is the crucial factor should consider during the preparation of retirement plan. The most important thing it should start as early as possible at the beginning of the career.

First, we should make a list of current monthly expenses and annual expenses. After making list one should analyze how much these expenses are likely to increase or decrease after the retirement. After this consider inflation rate to these expenses to arrive approximate figure at the time of retirement. Estimate your and your partner’s life expectancy and calculate how much corpus needed for you after retirement till death to support your expenses.

Once we arrive to the corpus figure, now the question where we have to invest and how much amount have to invest for achieving this corpus figure. Evaluate the amount you need monthly or yearly to achieve target corpus. The most suitable invest avenue is mutual fund. Use the power of compounding by investment systematically in mutual fund through SIP plan. With the right mix of debt and equity one can successfully achieve the required retirement corpus. As your age reach near about to retirement age, reduce your equity exposure and shift it to debt systematically.

After making investment don’t divert from the plan, be disciplined and make investment regularly. In some time interval like annual you should revisit the plan and make sure your investment is on track. The most important thing is not to use your retirement corpus for your other requirement or before your retirement. Planning for retirement is not a rocket science. It is very simple step by step plan but this required only discipline and regular investing.

If you find difficulties to make your retirement plan then involve your Independent Financial Planner/advisor. Be in touch with your financial advisor during the entire investment period and clear your doubt investment and financial planning.

If you have any query regarding investment please feel free to ask.

 Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Retirement Planning - Its Importance

Have you prepared your retirement plan ?

We all work hard entire life for our daily needs and responsibilities. Our daily essential expenses has become costly day by day and the common man are in trouble to match the income for their current daily life expenses. During this daily life income generation struggle, somehow we are ignoring our after retirement plan. All of us expect a stress free retirement life and for that we need a suitable corpus. This corpus is nothing but replacement of your income when you stop working after retirement. The importance of building retirement corpus you can imagine that even today we are earning and hardly fulfil our needs and when we will stop earning then how can we expect stress free life. Migration of children, weakening joint family system, increased life expectancy, increasing medical bill, increased cost of living are the main factors which forced us to think about retirement planning in very serious.

One more crucial factor is inflation we should consider at the time of making retirement plan. It makes life worse more for retired person. For example if average inflation rate for next 25 year is 8% and our monthly expenses is Rs 15,000. So we need around Rs 1,00,000 per month with the effect of inflation.

Most of young people, at the beginning of their career completely ignore thinking about retirement plan. But please note down retirement is reality for every working person and for comfortable life style after retirement should make planning at the very beginning of the career. In most cases we have roughly 30 years for building the retirement corpus. As age of around 25 the person get job and around 55 take retirement. It means we should invest for some part of our saving for comfortable retired life during our working years.

So now it has become clear that how important to plan for after retirement life. If you find it is difficult to make retirement corpus then contact any independent financial advisor ( IFA).There are many ways to build retirement corpus like SIP in equity mutual fund, regular investment in government sponsored NPS (New Pension Scheme), PPF (Public Provident Fund), Provident Fund for employee, Annuity Schemes etc. We will discuss about these options in upcoming blog.

If you have any query regarding investment please feel free to ask.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Distributors Fee reduced by AMFI

Welcome move from AMFI to boost for mutual fund industry

Since last 2 weeks I was out of city in my native place spending good time with family and relatives. It is very good sign that small city resident specially young generation investing in mutual fund. There are very good potential for growing mutual fund industry in near future. Only need is to spread awareness and benefit of investing in mutual fund with honest and ethics. There should not be miss- selling of product as it is very bad to grow for this industry.

SEBI has already taken a step to boost this mutual fund industry. Now one more good news for mutual fund distributors that Association of Mutual Fund  in India (AMFI) has reduced the registration fees for mutual fund distributors to increase the penetration of mutual funds and incentivize distributors beyond the metros.

The revised fee will be applicable from November 1. First time Individual Financial Advisors (IFAs) will now have to pay only Rs 3,000 for registration, compared with Rs 5,000 earlier. The renewal fees for existing IFAs is reduced Rs1500 from Rs2500 earlier.

In August SEBI created a new category of distributors which includes individuals like senior citizens, postal agents, retired teachers and other retired government officials who have been in service for at least 10 years in their respective organisations. The fee for this category has been fixed at Rs 3,000 per person.

The registration fee for NBFCs has been reduced by 80% from Rs 5 lakh earlier to Rs 1 lakh now and the renewal fee from Rs 2.50 lakh to Rs 50,000 now. Earlier all types of banks, be it private, or co-operative had to pay Rs 5 lakh as registration fee. Now, AMFI has introduced a separate category for regional rural banks, district central co-op. banks that have to pay Rs 1 lakh for getting MF distribution license.

Many distributors were demanding that fees be reduced as after the abolition of entry load, their income had reduced. Many market expert assume that this reduction in fee will lead to higher number of distributors entering in Tier-2 and Tier-3 cities which will benefit the industry over a period of time. This is in keeping with SEBI's aim to get more retail participation from beyond the tier-I and tier-II cities.

So overall it is good move from AMFI to increase retail participation form smaller and medium sized cities.

If you have any query regarding investment please feel free to ask.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com

Temptation about gold

Are you tempt about Gold ?

Now a days, when I meet any my friends, clients they all asked one common question what is your view on gold price. Some of them talk about investing in gold is the best option as per today’ situation for long term and some tempt for short term trade and want to reap benefit of short term trading. People invest in gold for a many reason. The reason may be hedge against inflation, political crisis, the risk of stock market crash and many more. In our country people invest in it for child’s marriage and transfer it to next generation and almost every household have some quantity of gold. Investing in physical gold is top choice of the people. But in current financial planning terms the question is how much percentage you should allocate to gold. The answers are quite interesting range within 5% to 45%. Yes, believe me some investor or financial advisor advice even more than 45% allocation of gold.

So in my understanding one should understand clearly what kind of investor you are before trying your hand in gold investment or speculation. Because there are different types of participant in gold market and a plenty of options available like ETF gold, Gold Mutual Fund, Gold trade in National Spot Exchange and many more. Earlier we had only limited options like physical gold in terms of coin, bar, jewellery. There are also Future and option trading also available in exchanges. As an investor be clear your category whether you need to trade in future and option gold or only invest in coin, bar or paper gold. There are different set of expenses in very investing mode. So it is very important to understand the cost of investing and fix the investment horizon also.

Do you proper homework on all the available mode of gold. Do not fully dependent on your broker. There are very useful websites are available with useful information and tips. If your horizon is long term investment then go with National Spot exchange and if you want trade for short term gain / loss go with MCX (Multi Commodity Exchange).

Understanding the movement of gold is very important t o get success. Gold is used not only as a commodity but also as a currency. So there are many factors to affect the price of gold as it is associated with global events. There are also risk of loose money in short term trade so it is better to understand those risk also. In point of view trading , I advise keep book you small profit and never forget stop loss otherwise the chances of losing money is more. Never compare other’s return with your return. Be happy whatever profit you have booked. In trading both are possible you can earn money and you can lost money also.

As you may have different opinion from mine but in my opinion keep away from trading and invest 20 % maximum of your investment portfolio as it is hedging instrument not a good return asset for long term. There are not much gain in speculating of bullion commodity.

If you have any query regarding investment please feel free to ask.

Regards,

Arvind Trivedi

Certified Financial Planner

arvind.trivedi79@gmail.com