Imagine walking into a massive shopping mall. This mall has 100 stores selling everything from electronics to luxury goods to medicines. Now, imagine you decide to shop only at four of these stores and ignore the other 96 completely. You would miss out on the best products, the best prices, and the best innovations.
This is exactly what Indian investors do when they invest only in the Indian Stock Market. India represents roughly 3.5% to 4% of the total world equity market capitalization. By ignoring international markets, you are effectively ignoring 96% of the global opportunity set.
This phenomenon is called "Home Country Bias." It is the tendency for investors to invest a majority of their portfolio in domestic equities because it feels familiar and safe. In this module, we will explore why breaking this bias is the single most effective way to protect and grow your wealth.
1. The 4% Problem
While India is the fastest-growing major economy, it is still a small fish in a very large ocean. The global market is dominated by the United States, followed by China, Japan, and Europe.
Global Market Cap Breakdown
Limiting yourself to India means missing out on the growth of Apple, Microsoft, LVMH, Samsung, and Toyota.
2. The Currency Advantage (The Dollar Hedge)
Investing globally is not just about stock returns; it is about Currency Returns. The Indian Rupee (INR) is an emerging market currency. Historically, it depreciates against the US Dollar (USD) by roughly 3-5% every year due to inflation differentials.
Why does this matter?
If you invest in the S&P 500 (US Market) and the index stays flat (0% return), but the Rupee falls by 5% against the Dollar, your portfolio value in INR terms goes up by 5%.
If you send your child to study in the US in 2035, you will need Dollars. Saving in Rupee for a Dollar goal is a massive risk.
3. Access to Sectors Missing in India
The Indian stock market is heavy on Banking, Finance, and IT Services. However, we lack global giants in several key sectors:
You use an iPhone, search on Google, scroll on Instagram (Meta), and drink Coca-Cola. You contribute to their profits every day. Why not own a piece of them? By investing globally, you gain exposure to the best companies on Earth, not just the best companies in India.
4. Diversification: The Free Lunch
Markets do not move in sync. There are years when India underperforms while the US outperforms, and vice versa.
Example: In 2013-14, Emerging Markets (like India) struggled, while the US market rallied. In 2022, US Tech crashed, while India remained relatively resilient.
By holding assets in different geographies, you reduce the Correlation Risk of your portfolio. If the Indian economy faces a specific crisis (e.g., a bad monsoon or political instability), your US and European investments act as a safety net.
5. How Difficult is it?
A decade ago, investing abroad was a nightmare of paperwork. Today, it is effortless.
1. Feeder Mutual Funds: You can buy Indian Mutual Funds that invest in US ETFs (e.g., Motilal Oswal Nasdaq 100). You pay in Rupees, get returns in Rupees (adjusted for USD growth).
2. LRS (Liberalised Remittance Scheme): You can remit up to $250,000 per year to buy stocks directly via platforms like Vested or IndMoney.
Summary of Module 1
Global investing is not unpatriotic; it is prudent financial management. It protects your purchasing power against currency depreciation, gives you access to world-class innovation, and smooths out the volatility of your portfolio.
But where exactly should you invest? Is the US the only option, or should you look at Europe and China? In the next module, we will tour the world map and analyze the Major Global Markets.