International Investing for Indians: ETFs, GIFT City, S&P 500, Nasdaq & UCITS Explained

Do not build your global portfolio like a YouTube watchlist. A few stocks here, a Nasdaq ETF there. Because buying global products is easy, but building a sensible global portfolio is not. What should Indians actually buy? A few years ago, international investing was difficult for Indian investors.

Today, that has changed. You can open a global account digitally through platforms like INDmoney, Vested, Interactive Brokers and many others. You can remit money under LRS. You can buy US stocks, US-listed ETFs, Ireland-domiciled UCITS ETFs, and even Indian AMCs are launching their GIFT City-based retail funds, which start at just $5,000. So access is no longer the biggest problem.

The bigger question is: now that international investing is easy, what should Indians actually buy? Should you buy Apple, Microsoft, Nvidia, Tesla? Or should you buy the S&P 500, Nasdaq 100, a US-listed ETF or an Ireland-domiciled UCITS ETF? Should you buy an Indian mutual fund or a GIFT City-based retail fund? In this video, let us discuss these not like a product catalogue, but more like a portfolio decision.

Because buying global products is easy, but building a sensible global portfolio is not. First, international investing is not a bet against India. India can do very well and you may still need international exposure. Why? Because most Indian investors are already extremely India-heavy.

Your income is in India. Your home is in India. Your business or job is in India. Your EPF, PPF, NPS, FDs, mutual funds and even stocks are mostly in India. So before you even make an investment decision, your financial life is already concentrated in one country and one currency.

India is only a small part of the global equity opportunity set. So when an Indian investor has almost zero overseas exposure, it is not a neutral position. It is actually a very large India-only position. That may be fine for some investors, but it should be a conscious decision and not an accidental one. There are three broad reasons one should invest globally.

One is diversification. Two is access to global businesses. And three is planning for dollar-linked goals. Your child may want to study abroad. Your future lifestyle may have global expenses.

Many things that you consume today, or will consume tomorrow, are priced globally. So having some exposure to these can actually help. This does not mean that 50% of the portfolio should go abroad. It simply means that zero may not be the right answer for everyone.

Now many investors say, “I want to invest in the US.” But even within the US, what exactly do you want to invest in? The S&P 500 and Nasdaq 100 are two very different broad indices. The S&P 500 has 500 companies. It covers all major sectors.

It represents a large part of the US equity market. It also has a profitability filter. So for many investors, the S&P 500 can be a core US allocation. The Nasdaq 100 is different. It has 100 large non-financial companies listed on Nasdaq.

It is much more of a tech- and growth-heavy play. It has companies like Microsoft, Nvidia, Apple, Broadcom, Amazon and Tesla. So that is powerful, but it can be very concentrated. Please don’t call Nasdaq global diversification. Nasdaq is a US tech- and growth-oriented exposure.

It can be a good satellite allocation, but for most investors it should not automatically become their entire international exposure.

Now let’s come to structure. If you open a global account, you may be able to buy US-listed ETFs such as an S&P 500 ETF or QQQ. The biggest advantage here is cost. Some US-listed ETFs are available at extremely low cost. An S&P 500 ETF can cost around 0.03% per year, and a Nasdaq ETF like QQQ can cost around 0.18% per year.

So purely from a product-cost point of view, US-listed ETFs are very attractive. But Indian investors must understand two points. First, dividend withholding tax. Dividends from US-listed ETFs are subject to withholding tax. Second, estate tax.

US-listed stocks and ETFs are generally treated as US-situs assets. For a non-US resident, the estate-tax threshold is around $60,000. So if your total US-situs exposure is small and much below that $60,000 mark, estate tax may not be a big practical concern. But once these assets gradually start inching towards $60,000, you probably should not ignore this.

That is where Ireland-domiciled UCITS ETFs can become more relevant. Ireland-domiciled ETFs can give you exposure to the same markets — S&P 500, Nasdaq or even global equities — in an ETF format. Because they are domiciled outside the US, the structure is different, although the expense ratio can be slightly higher. For example, an S&P 500 UCITS ETF may cost about 0.07%. A Nasdaq UCITS ETF may cost about 0.3%.

Even a global all-world UCITS ETF may cost around 0.19%. So the question is not only about the expense ratio. The question is about the total outcome: Cost. Dividend withholding tax.

Estate tax. Brokerage. Forex cost. Tax reporting. And how large your portfolio is.

My simple framework is this. If your global exposure is small and much below that $60,000 mark, a US-listed ETF can be a simple and low-cost route. But if your exposure is meaningful, and especially if it is above roughly $60,000, Ireland-domiciled UCITS ETFs may deserve serious consideration. And if the exposure is very large, then proper wealth structuring becomes important rather than simply making a product decision.

Now the GIFT City route is also becoming very interesting. Indian AMCs are launching dollar-denominated global funds from IFSC. For Indian investors, this creates a kind of middle route. It is not an Indian international mutual fund. It is also not like DIY investing through a global brokerage account.

And it is not as inaccessible as traditional offshore structures. But the big question is: are GIFT City funds better than ETFs? Let’s try and answer that honestly. For passive exposure, ETFs are usually cheaper. For example, if you buy S&P 500 exposure through a direct ETF or even a UCITS ETF, it can usually cost much less than what a passive GIFT City fund of funds may charge.

A passive GIFT City S&P 500 fund may charge around 40 basis points, while an S&P 500 UCITS ETF may cost around 0.07%. Even a Nasdaq GIFT City direct fund may cost around 0.55%, while a Nasdaq UCITS ETF may cost around 0.3%. So purely on cost, ETFs of course win. But cost is not the only important factor. GIFT City funds offer convenience.

You don’t need to select ETFs yourself. You don’t need to directly manage a foreign brokerage account. Taxes can be handled at the fund level. Foreign-asset reporting, which can also be a big hassle, is handled at the fund level. There is no US estate-tax issue at the investor level in the same way.

At the same time, you get Indian AMC governance and an Indian service-support system. So the GIFT City passive route is not the cheapest route. It is more of a convenience and structural choice. This distinction is very important to understand.

Now let’s separate two categories. Parag Parikh S&P 500 and Nasdaq 100 GIFT funds are passive fund-of-funds. They are meant to replicate an index through ETFs or UCITS ETFs. So they should be compared more with ETFs or UCITS ETFs. DSP Global Equity Fund and Marcellus Global Equities, on the other hand, are active equity strategies.

They are not trying to simply replicate the S&P 500 or Nasdaq index. DSP, for example, is positioned as a bottom-up, valuation-conscious and unconstrained global strategy which can also hold cash. It can be underweight the US. It can avoid popular themes like AI for now. So it can look completely different at times from an MSCI index, the S&P 500 or Nasdaq.

Marcellus is also positioned more like a global equity strategy focused on high-quality global businesses, with reduced investor-level tax compliance. These active funds are, of course, more expensive than ETFs. But that does not automatically make them a bad choice. The question is different here. With passive products, you can ask whether you are getting the exposure you want at a cheaper cost.

But with active products, you have to ask questions like: Is my portfolio genuinely going to be different? What kind of investment style is the manager going to follow? Is this a core part of my portfolio or a satellite portfolio? Can I tolerate the underperformance that a particular investment style may go through?

Active strategies can have periods of underperformance. So do not buy an active GIFT City fund thinking it is just a cheaper and easier S&P 500. It is not. It is a manager-selection decision. There is one more important point.

Every few years, one global story becomes favourable. Sometimes it is China. Sometimes Brazil. Sometimes Taiwan. Sometimes Korea.

There can also be themes like AI, semiconductors, defence, luxury or even Nasdaq. The problem is not that these themes are bad. Some of them may be excellent long-term opportunities. The problem is that investors usually enter these stories after the visible returns. That is not a portfolio-construction strategy.

It is more like return chasing. So your first international allocation should not be a theme call. It should not even be a country call. It should be portfolio allocation. Core first, satellite later.

For many investors, the S&P 500 or broad global exposure should come much before Nasdaq, AI or a semiconductor theme.

So here is my simple practical framework. If you are just starting out and your allocation is small, keep it simple. Don’t overcomplicate things on day one. Start with broad exposure. Avoid building your portfolio with those five famous US stocks.

If you want to keep it low-cost, and you are comfortable with global brokerages, LRS, some amount of tax reporting and rebalancing, ETFs and UCITS ETFs can be suitable routes. If you want passive exposure without too much tax handling and with simpler operations, a GIFT City-based passive fund of funds is something you may look at. But if you want an actively managed global fund, then Marcellus or DSP can be options to evaluate. For the S&P 500, think more like a core US exposure. For Nasdaq, think of it like a satellite growth exposure.

For broad global ETFs, think global diversification. And if you buy active global funds, then it becomes a manager-selection process. For US-listed ETFs, remember that $60,000 estate-tax threshold. If you are below that, US-domiciled ETFs or equity may be a simpler route. Above that, it becomes more of a structural decision, and considering UCITS ETFs becomes important.

International investing has become much easier. But easy access does not automatically create a very good portfolio. The real question is not whether you can buy US stocks or ETFs. The real questions are: Why are you investing abroad?

How much of your portfolio should you allocate to this? Should your exposure be core or satellite? Should you invest in US stocks, ETFs, UCITS ETFs or GIFT City funds? And are you choosing a particular product because of cost, convenience, tax structure or because you want active management? For small investors, simplicity matters.

For affluent investors, structure matters. For HNI investors, tax, estate planning, reporting and product selection all matter. So do not build your global portfolio like a YouTube watchlist. A few stocks here, a Nasdaq ETF there, one GIFT City fund. A good global portfolio should have a clear role in your overall wealth.

Because the goal is not to own global products. The goal is to build globally sensible wealth. I hope this video helps you in that endeavour. Signing off. Sachin Kabra.

Please note, this video is only for education and discussion. Please speak to your financial adviser and tax adviser before making any investment decision. Thank you.