ETFs, mutual funds or direct stocks? Choosing the right route for global investing: Nikhil Advani - The Economic Times

As China remains a selective bet, particularly in AI and manufacturing, though geopolitical risks persist. Indian investors increasingly look beyond domestic markets to build globally diversified portfolios, choosing the right investment route has become just as important as selecting the market or theme. In this interview with Kshitij Anand, Nikhil Advani, Managing Director and Head of International Business at LGT Wealth India, breaks down the pros and cons of investing overseas through ETFs, mutual funds, and direct stocks. He explains how each option fits different risk profiles, cost considerations, and investment objectives, while also touching on regulatory changes under LRS, taxation nuances, and the importance of a long-term, well-diversified approach to global investing in 2026 and beyond. Edited Excerpts - Q) As we step into 2026 - are you seeing a noticeable rise in outbound investment queries from your clients despite domestic markets hitting record highs? A) Absolutely. Even as Indian equity markets continue to scale new highs and the Sensex has given a 9% return this year, it has been a laggard when compared to global markets. The US markets are up 17%, Europe is up 20%, and Japan is up 27%. As a result, we are witnessing a steady increase in outbound investment queries. Investors are increasingly aware that global diversification is not about chasing returns but about mitigating concentration risk and accessing sectors that are underrepresented in India. Our internal data shows a 25-30% rise in client inquiries for global portfolios year-on-year, indicating that this trend is structural rather than cyclical. Q) Which global themes are attracting Indian investors today? A) The dominant themes remain technology-driven sectors, particularly artificial Intelligence and tech supply chain ecosystems. Clean energy and electric mobility are also gaining traction, supported by global commitments to net-zero targets. Healthcare and biotech continue to attract interest, especially after the pandemic underscored the importance of medical innovation. Commodities, particularly gold, remain a hedge against inflation and geopolitical uncertainty, with prices expected to move higher in 2026. Q) What key LRS or regulatory changes should investors watch in 2026? A) The most notable change is the increase in the TCS threshold from ₹7 lakh to ₹10 lakh, reducing friction for smaller remittances. Additionally, the RBI has mandated daily PAN-based reporting for banks through the CIMS portal starting January 2026, enhancing transparency and compliance. The overall LRS limit of $250,000 per individual per financial year remains unchanged. Q) How should investors navigate compliance, taxation, and reporting for overseas investments? A) Compliance begins with proper documentation under LRS and FEMA guidelines. Taxation is another critical aspect with long-term capital gains on overseas equities taxed at 12.5%. Investors must also account for foreign withholding taxes under applicable DTAA treaties on equity dividends. Reporting requirements include declaring foreign assets in the annual income tax return under Schedule FA. Q) How much of an average Indian investor’s portfolio should ideally be allocated to global assets in 2026? A) Investors should ideally have a 20% exposure to global assets. This allocation can help...

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