What are Global ETFs?

Global ETFs help you invest in international markets without buying foreign shares directly. They offer global diversification through a single investment.

Key highlights

• Invest in stocks, bonds, or other securities across different countries.
• Gain exposure to international markets through a single investment.
• Follow 4 simple steps to invest: open a Demat and trading account, choose an ETF, place your order, and monitor your portfolio.
• Holdings sold within 36 months are taxed according to your income tax slab.
• Holdings of more than 36 months are taxed at 20% with indexation benefits.

Several Global ETFs available in India provide exposure to different international markets and regions.

Each of these ETFs tracks a different market or index, allowing investors to choose international exposure based on their investment objectives.

Global ETFs may be suitable for investors looking to invest beyond domestic markets.

They are generally considered by:

Growth-oriented investors

Investors seeking exposure to international markets may consider Global ETFs to participate in the growth of sectors such as technology, healthcare, and finance across different countries.

Portfolio diversifiers

Global ETFs can also be considered by investors who want to diversify their portfolios. Investing across international markets helps spread investments over multiple economies instead of relying on a single market.

Diversification may also reduce the impact of fluctuations in the domestic market by providing exposure to overseas investments.

Investing in Global ETFs involves a few straightforward steps.

Step 1: Open a Demat and trading account

Register with a broker that offers access to Global ETFs. A Demat account is required to hold ETF units electronically, while a trading account enables you to buy and sell them.

Step 2: Research and choose an ETF

Evaluate the Global ETF before investing; review its performance, underlying index, and expense ratio.

Step 3: Place your order

After selecting an ETF, use your trading account to purchase units through the stock exchange.

Step 4: Monitor your investment

Review the performance of your Global ETF periodically. If required, rebalance your portfolio based on your investment objectives.

Global ETFs have become popular because they provide investors with access to international markets through a single investment.

Portfolio diversification

One of the primary benefits of Global ETFs is diversification. Since these funds invest across different countries and markets, they help spread investments across multiple regions.

This diversification reduces dependence on a single domestic market and provides broader market exposure.

Access to international markets

Global ETFs enable investors to participate in international economies without directly purchasing foreign securities.

They provide access to companies operating in sectors such as technology, energy, and healthcare across different countries.

Cost-effectiveness

Compared with investing directly in foreign stocks, Global ETFs offer a cost-efficient alternative.

They generally involve lower expense ratios and eliminate the need for high brokerage fees associated with international transactions.

Liquidity and ease of trading

Global ETFs are traded on stock exchanges in the same way as other exchange-traded funds.

This allows investors to buy or sell ETF units during market hours, providing liquidity and trading convenience.

Professional management

Most Global ETFs are passively managed and track recognised market indices.

This approach provides transparency while reducing the need for continuous monitoring of individual securities.

Hedging against currency depreciation

Global ETFs also provide exposure to foreign markets, which may help investors manage the impact of depreciation in the Indian Rupee against currencies such as the US Dollar or Euro.

Wide variety of investment options

Investors can choose from Global ETFs focusing on different regions, sectors, or asset classes.

This allows them to select funds based on the type of international market exposure they are looking for.

Although Global ETFs offer international market exposure and portfolio diversification, they also involve certain risks. Understanding these risks can help investors make informed decisions before investing.

Taxation is an important consideration when investing in Global ETFs. The tax treatment depends on how long you hold your investment.

Capital gains tax

Capital gains tax depends on the investment holding period.

If Global ETF units are sold within 36 months, any gains are treated as short-term capital gains and taxed according to the applicable income tax slab.

If the investment is held for more than 36 months, the gains qualify as long-term capital gains and are taxed at 20% with indexation benefits.

Dividend tax

Any dividends received from Global ETFs are taxable according to the investor's income tax slab.

Double Taxation Agreements

India has entered into Double Taxation Agreements (DTAs) with several countries. These agreements help avoid double taxation, and eligible investors may claim tax credits for taxes paid outside India.

Tax exemptions

Certain exemptions may be available for specific categories of investors, such as Non-Resident Indians (NRIs).

Global ETFs provide investors with an opportunity to access international markets through a single investment. They offer geographical diversification, exposure to overseas companies, and the convenience of investing without directly purchasing foreign securities.

At the same time, investors should consider the associated risks, including market volatility, currency movements, taxation, and geopolitical developments. Understanding both the potential benefits and the risks can help investors make informed investment decisions based on their financial objectives.