Currency and investing abroad
What does the rupee do to a foreign return, and what are you actually allowed to buy?
6 of 6 chapters published
Chapters
Beginner
- What an exchange rate isA price, quoted in a direction that confuses almost everybody. Getting the direction right is most of the work, because the sentence "the rupee fell" and the number that represents it move opposite ways.
- How currency affects a return you already haveTwo returns multiply rather than add, and the second one is not something you chose. For an Indian investor in a foreign asset, the currency leg has often been larger than the asset leg — in both directions.
Intermediate
- The LRS and its limitsUSD 250,000 a year, and a list of conditions most people discover only when a bank refuses a transfer. The limit is also a policy lever that has been pulled before — which is the part worth planning around.
- Routes: international funds, direct and GIFT CityThree ways to own foreign assets from India, and they differ in the thing that matters most — whether they consume your LRS allowance at all. What none of them permits is more surprising than what they do.
Advanced
- Hedged and unhedgedRemoving the currency leg is possible and it is not free — the cost is the interest rate differential, which for a rupee investor runs against you. And for most Indian investors the currency is the reason to hold the asset.
- Tax on foreign assets and the disclosure obligationThe last chapter of the subject, and the one where the asymmetry bites. The tax on a foreign holding is ordinary; the disclosure obligation is not, and it does not go away when the holding is small or loss-making.