Is International Diversification really necessary for Resident Indian?

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sharukh
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Re: Is International Diversification really necessary for Resident Indian?

Post by sharukh » Sun Dec 22, 2019 7:19 pm

sublimelaconic wrote:
Sun Dec 22, 2019 3:48 pm
LazyNihilist wrote:
Sun Dec 22, 2019 2:32 pm
Anon9001:

According to https://investor.vanguard.com/mutual-fu ... olio/vtwax India represents 1.1% of the world stock market. I would strongly recommend VT (or its equivalent Total World like VWRA) for Indian investors.

On the bond side, I would go with VAGU (or its equivalent), but there are a lot more options outside of it for fixed income.

I am not familiar with the tax situation of buying these funds vs funds on NSE/BSE. So that has to be taken into account as well.
As to how you purchase these, if you have more than USD100,000 InteractiveBrokers is a good option. If you have under USD100,000 I do not know what good options are available.
Tradestation Global is a good option if you have less than USD 100,000. Main benefit is that it has no inactivity/minimum fees, despite being partnered with IB.
Trade station global is UK based. I wonder what are it’s inheritance and estate tax are for Indian residents.

Topic Author
Anon9001
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Re: Is International Diversification really necessary for Resident Indian?

Post by Anon9001 » Sun Dec 22, 2019 11:41 pm

sublimelaconic wrote:
Sun Dec 22, 2019 3:48 pm
LazyNihilist wrote:
Sun Dec 22, 2019 2:32 pm
Anon9001:

According to https://investor.vanguard.com/mutual-fu ... olio/vtwax India represents 1.1% of the world stock market. I would strongly recommend VT (or its equivalent Total World like VWRA) for Indian investors.

On the bond side, I would go with VAGU (or its equivalent), but there are a lot more options outside of it for fixed income.

I am not familiar with the tax situation of buying these funds vs funds on NSE/BSE. So that has to be taken into account as well.
As to how you purchase these, if you have more than USD100,000 InteractiveBrokers is a good option. If you have under USD100,000 I do not know what good options are available.
Tradestation Global is a good option if you have less than USD 100,000. Main benefit is that it has no inactivity/minimum fees, despite being partnered with IB.
Yeah about that checked it out now and click country as India and submitted personal details to form and it says not available for India :oops:

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Anon9001
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Location: भारत

Re: Is International Diversification really necessary for Resident Indian?

Post by Anon9001 » Sun Dec 22, 2019 11:43 pm

sharukh wrote:
Sun Dec 22, 2019 7:19 pm
sublimelaconic wrote:
Sun Dec 22, 2019 3:48 pm
LazyNihilist wrote:
Sun Dec 22, 2019 2:32 pm
Anon9001:

According to https://investor.vanguard.com/mutual-fu ... olio/vtwax India represents 1.1% of the world stock market. I would strongly recommend VT (or its equivalent Total World like VWRA) for Indian investors.

On the bond side, I would go with VAGU (or its equivalent), but there are a lot more options outside of it for fixed income.

I am not familiar with the tax situation of buying these funds vs funds on NSE/BSE. So that has to be taken into account as well.
As to how you purchase these, if you have more than USD100,000 InteractiveBrokers is a good option. If you have under USD100,000 I do not know what good options are available.
Tradestation Global is a good option if you have less than USD 100,000. Main benefit is that it has no inactivity/minimum fees, despite being partnered with IB.
Trade station global is UK based. I wonder what are it’s inheritance and estate tax are for Indian residents.
Forget it is not avialable for Indian Residents.

Topic Author
Anon9001
Posts: 283
Joined: Fri Dec 20, 2019 9:28 am
Location: भारत

Re: Is International Diversification really necessary for Resident Indian?

Post by Anon9001 » Sun Dec 22, 2019 11:45 pm

sharukh wrote:
Sun Dec 22, 2019 7:19 pm
sublimelaconic wrote:
Sun Dec 22, 2019 3:48 pm
LazyNihilist wrote:
Sun Dec 22, 2019 2:32 pm
Anon9001:

According to https://investor.vanguard.com/mutual-fu ... olio/vtwax India represents 1.1% of the world stock market. I would strongly recommend VT (or its equivalent Total World like VWRA) for Indian investors.

On the bond side, I would go with VAGU (or its equivalent), but there are a lot more options outside of it for fixed income.

I am not familiar with the tax situation of buying these funds vs funds on NSE/BSE. So that has to be taken into account as well.
As to how you purchase these, if you have more than USD100,000 InteractiveBrokers is a good option. If you have under USD100,000 I do not know what good options are available.
Tradestation Global is a good option if you have less than USD 100,000. Main benefit is that it has no inactivity/minimum fees, despite being partnered with IB.
Trade station global is UK based. I wonder what are it’s inheritance and estate tax are for Indian residents.
I actually checked the correlations myself for Nasdaq 100 (Fund we have in India to invest internationally) and World Index and it is 0.81 :https://www.portfoliovisualizer.com/bac ... tion3_2=50

Click Assets Tab and see Monthly Correlations. Unless you are masochist I think avoiding Interactive Brokers is a good idea and just using Nasdaq 100 FOF is good enough.

CarpeDiem22
Posts: 238
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Re: Is International Diversification really necessary for Resident Indian?

Post by CarpeDiem22 » Mon Dec 23, 2019 12:00 am

OP
Sometime before you were born, around the time when Berlin wall was coming down and Soviet Union was disintegrating into parts, India came very close to default on its payments. While India's SIZE has grown multi-fold since then, it still runs fiscal deficit and current account deficit, and there is no assurance that this 1991 crisis won't repeat in the future. https://en.wikipedia.org/wiki/1991_Indi ... mic_crisis

Some thoughts I want to share with you:
1. Assuming you hold some real estate and gold for diversification, on debt side I agree with you, PPF and EPF are completely tax-free high-return government-guaranteed debt investment options that even US and Europe don't have, equity side is risky and should be diversified in my opinion. (PPF is even insulated from bankruptcy).
2. When you compare Indian v/s global returns, keep in mind the currency. INR depreciates about 5% against USD every year. Nifty has given close to ZERO USD return in last 10 years. All INR returns are due to INR depreciation.
3. Indian government bonds are rated BBB- by S&P and are not same quality as US bonds which are rated AA+.

Topic Author
Anon9001
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Re: Is International Diversification really necessary for Resident Indian?

Post by Anon9001 » Mon Dec 23, 2019 12:17 am

CarpeDiem22 wrote:
Mon Dec 23, 2019 12:00 am
OP
Sometime before you were born, around the time when Berlin wall was coming down and Soviet Union was disintegrating into parts, India came very close to default on its payments. While India's SIZE has grown multi-fold since then, it still runs fiscal deficit and current account deficit, and there is no assurance that this 1991 crisis won't repeat in the future. https://en.wikipedia.org/wiki/1991_Indi ... mic_crisis

Some thoughts I want to share with you:
1. Assuming you hold some real estate and gold for diversification, on debt side I agree with you, PPF and EPF are completely tax-free high-return government-guaranteed debt investment options that even US and Europe don't have, equity side is risky and should be diversified in my opinion. (PPF is even insulated from bankruptcy).
2. When you compare Indian v/s global returns, keep in mind the currency. INR depreciates about 5% against USD every year. Nifty has given close to ZERO USD return in last 10 years. All INR returns are due to INR depreciation.
3. Indian government bonds are rated BBB- by S&P and are not same quality as US bonds which are rated AA+.
Interesting personally I would like to hear your opinions on Nasdaq 100 FOF vs buying the ETF directly. The FOF tracks the price of the ETF not the NAV so I thought it would be better idea to avoid using it as I have demat account. The issue is liquidity. Sometimes the Nasdaq ETF is down to 10 lakhs turnover. I only have 8 lakhs to invest in Nasdaq 100.

CarpeDiem22
Posts: 238
Joined: Tue May 22, 2018 11:20 pm

Re: Is International Diversification really necessary for Resident Indian?

Post by CarpeDiem22 » Mon Dec 23, 2019 12:34 am

Anon9001 wrote:
Mon Dec 23, 2019 12:17 am
Interesting personally I would like to hear your opinions on Nasdaq 100 FOF vs buying the ETF directly. The FOF tracks the price of the ETF not the NAV so I thought it would be better idea to avoid using it as I have demat account. The issue is liquidity. Sometimes the Nasdaq ETF is down to 10 lakhs turnover. I only have 8 lakhs to invest in Nasdaq 100.
I own N100 ETF directly. Liquidity will only dry up during economic downturns and recessions but that is not the right time to sell anyway. Be aware about difference between NAV and price when you make the trades. Authorized participants in India target about 0.8% bid-ask spread so that's the amount which is fair to pay. Any price you pay over NAV would be offset by lower expense ratio of the ETF.

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Anon9001
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Re: Is International Diversification really necessary for Resident Indian?

Post by Anon9001 » Mon Dec 23, 2019 12:51 am

CarpeDiem22 wrote:
Mon Dec 23, 2019 12:34 am
Anon9001 wrote:
Mon Dec 23, 2019 12:17 am
Interesting personally I would like to hear your opinions on Nasdaq 100 FOF vs buying the ETF directly. The FOF tracks the price of the ETF not the NAV so I thought it would be better idea to avoid using it as I have demat account. The issue is liquidity. Sometimes the Nasdaq ETF is down to 10 lakhs turnover. I only have 8 lakhs to invest in Nasdaq 100.
I own N100 ETF directly. Liquidity will only dry up during economic downturns and recessions but that is not the right time to sell anyway. Be aware about difference between NAV and price when you make the trades. Authorized participants in India target about 0.8% bid-ask spread so that's the amount which is fair to pay. Any price you pay over NAV would be offset by lower expense ratio of the ETF.
I just checked the NAV-Price difference and it is 0.59% so much better than what you described. I think that is due to the FOF being mandated to buy the units at market price.

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Anon9001
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Re: Is International Diversification really necessary for Resident Indian?

Post by Anon9001 » Mon Dec 23, 2019 2:10 am

CarpeDiem22 wrote:
Mon Dec 23, 2019 12:34 am
Anon9001 wrote:
Mon Dec 23, 2019 12:17 am
Interesting personally I would like to hear your opinions on Nasdaq 100 FOF vs buying the ETF directly. The FOF tracks the price of the ETF not the NAV so I thought it would be better idea to avoid using it as I have demat account. The issue is liquidity. Sometimes the Nasdaq ETF is down to 10 lakhs turnover. I only have 8 lakhs to invest in Nasdaq 100.
I own N100 ETF directly. Liquidity will only dry up during economic downturns and recessions but that is not the right time to sell anyway. Be aware about difference between NAV and price when you make the trades. Authorized participants in India target about 0.8% bid-ask spread so that's the amount which is fair to pay. Any price you pay over NAV would be offset by lower expense ratio of the ETF.
Also thank you for advice everyone else here is recommending VT/VWRA not knowing how expensive it is for Indian investor. You are the only guy here who understands my problems. If VT/VWRA were available directly without foreign broker I would buy them instantly but alas :annoyed

finrod_2002
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Re: Is International Diversification really necessary for Resident Indian?

Post by finrod_2002 » Mon Dec 23, 2019 3:02 am

Anon9001 wrote:
Mon Dec 23, 2019 2:10 am
If VT/VWRA were available directly without foreign broker I would buy them instantly but alas :annoyed
Not sure how this broker works for Indian investors, but it could give you some more options.

https://tastyworks.com/

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Anon9001
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Re: Is International Diversification really necessary for Resident Indian?

Post by Anon9001 » Mon Dec 23, 2019 3:05 am

finrod_2002 wrote:
Mon Dec 23, 2019 3:02 am
Anon9001 wrote:
Mon Dec 23, 2019 2:10 am
If VT/VWRA were available directly without foreign broker I would buy them instantly but alas :annoyed
Not sure how this broker works for Indian investors, but it could give you some more options.

https://tastyworks.com/
Thanks but I still need to convert INR to USD to deposit there and they only allow US ETF's which have 25% Dividend Withholding Taxes. VT which has 2% Dividend Yield would cost 0.6+0.09+0.6%= 1.29% TER. You could also consider the currency conversion as a front load of 0.69% which means TER is only 0.69%.

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Anon9001
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Re: Is International Diversification really necessary for Resident Indian?

Post by Anon9001 » Mon Dec 23, 2019 3:12 am

Wait I forgot to consider DWT of 25% applies to US stocks and on top of Ex-US Stocks DWT. So DWT would actually be 30-35% if you are holding VT.

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Anon9001
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Re: Is International Diversification really necessary for Resident Indian?

Post by Anon9001 » Mon Dec 23, 2019 4:29 am

CarpeDiem22 wrote:
Mon Dec 23, 2019 12:00 am
OP
Sometime before you were born, around the time when Berlin wall was coming down and Soviet Union was disintegrating into parts, India came very close to default on its payments. While India's SIZE has grown multi-fold since then, it still runs fiscal deficit and current account deficit, and there is no assurance that this 1991 crisis won't repeat in the future. https://en.wikipedia.org/wiki/1991_Indi ... mic_crisis

Some thoughts I want to share with you:
1. Assuming you hold some real estate and gold for diversification, on debt side I agree with you, PPF and EPF are completely tax-free high-return government-guaranteed debt investment options that even US and Europe don't have, equity side is risky and should be diversified in my opinion. (PPF is even insulated from bankruptcy).
2. When you compare Indian v/s global returns, keep in mind the currency. INR depreciates about 5% against USD every year. Nifty has given close to ZERO USD return in last 10 years. All INR returns are due to INR depreciation.
3. Indian government bonds are rated BBB- by S&P and are not same quality as US bonds which are rated AA+.
Yes I forgot to mention this but Zerodha is looking to add International Investing to their brokerage. This might be good to invest in if it launches:https://yourstory.com/2019/10/techspark ... po-startup

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LadyGeek
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Re: Is International Diversification really necessary for Resident Indian?

Post by LadyGeek » Tue Dec 24, 2019 8:11 pm

The OP is requesting assistance with his portfolio in this thread: My Portfolio Seeking Advice [India]

Please ask portfolio questions in that thread.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Money Market
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Re: Is International Diversification really necessary for Resident Indian?

Post by Money Market » Wed Dec 25, 2019 12:19 am

Many Bogleheads have 100% US equity portfolios because they believe in John Bogle's work showing how internationally exposed US companies are. Being 55% of the world market capitalization, it is also a safer bet than investing only in say, Finland which is less than 1% of world market cap. By investing only in one's home country, they are also taking more risk (country-specific risk) and expect to be compensated more for it. For the past 9 years, this has been true.

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Anon9001
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Re: Is International Diversification really necessary for Resident Indian?

Post by Anon9001 » Thu Feb 13, 2020 6:59 am

I am back and after doing more research I have decided foreign assets are needed. I have 50% of my money invested in assets which are not linked to Indian Economy ie Gold and Foreign Equities evenly split. Thanks for all the answers. ValueThinker was especially very helpful. The foreign currency exposure is actually good for me considering USD-INR goes up whenever there is a global recession but I would still limit the foriegn currency exposure to 50% of my money.

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