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Interested in investing in International mutual funds?

Today through our blog, we are going to discuss the International Funds, their benefits their types and who should invest in international funds. Read our blog and get to know everything about International Funds.

 WHAT ARE INTERNATIONAL MUTUAL FUNDS? 

International Funds are kind of funds that invest in firms or companies of other countries or companies outside the investor’s native country. Like for example, in the case of India, it would be funds that invest in the equities of companies that are outside India. These funds are also popular as Overseas Funds or Foreign Funds.

The main motive of investors, behind investing in Foreign Funds is, to give a good diversification to their portfolio. A diverse portfolio not only split the risks but also tap the earning potential of different markets.

TYPES OF INTERNATIONAL MUTUAL FUNDS 

  1. Global Funds: Generally, funds that are available across the world, including the home country, are known as global funds whereas, foreign funds are those available only in other countries, and not in the native country.
  2. Regional Funds: Funds, that invest in securities from a specified geographical area, are known as Regional Fund. These are also known as Local Funds.
  3. Country Funds: Fund that invests in securities, generally stocks, of companies located exclusively in a specific country, are known as Country Funds.
  4. Global Sector Funds: Global Funds, that mainly focus or aims for exposure to a particular industry or sector, are known as global sector funds.

BENEFITS OF INTERNATIONAL MUTUAL FUNDS

Investment in International Mutual Funds has the following major advantages:

  1. Diversification: Investing in international funds, help investors to diversify their portfolio and give them access to the broad markets. Hence, when there is a market low in the home country, investor’s international funds would help them compensate for it.
  2. Balance economic volatility: Investing in mutual funds of various economies, help investors to earn a good return, and get the benefit of different economic cycles. Also, this very process helps to nullify the losses of economic volatility of the investments by profiting from better performing economies.
  3. Access to foreign blue-chip companies: Some of the giant companies like Google, Microsoft or Cola, do not have their shares listed in Indian stocks, thus the only way of investing in their shares is through international mutual funds or direct investment.
  4. International Exposure under Expert Management: If you are worried that, you are not aware with the facts related to international funds, also you do not know the condition of the foreign market and are backing out form international funds, then don’t worry, here, a qualified intermediary can assist you with your investment. Therefore, you can gain exposure to the global market, even if you are not familiar with it.

FACTORS TO BE CONSIDERED BEFORE INVESTING IN INTERNATIONAL FUNDS 

International funds offer a good quality of portfolio diversification to its investors along with a good opportunity for earning a good return from the growth of companies around the world, but at the same time these funds have its own set of risks and benefits, better judge your investment wisely in International Funds.

  1. Risk Factor: The most important risk related to international fund is, currency risk. When you invest, you invest in rupees which get converted into other currency, as per the currency of the country where it is invested. Currency exchange rates go through highs and lows all the time. For instance, in a US-centric international fund if the rupee falls against the dollar, then you get more rupees per dollar invested – the NAV shoots up and vice-versa.
  2. Dual Market Risk: International Funds are affected by the other countries market fluctuation, thus, the investor must go through value research and contemplation, so that they can choose their investment wisely.
  3. Tax-Efficiency: International funds are taxed as debt funds unless they invest at least 65% of their portfolios in Indian equity instruments. When treated as debt funds, short-term capital gains are taxed at the investor’s marginal rate of tax and long-term capital gains on investments held for more than 36 months are taxed at 20% with indexation benefits.
  4. Requires Constant Vigilance: Political, social and economic aspects in different countries can impact mutual fund performances differently. Hence, the investor needs to keep track of the market movement regularly, with good concentration.

WHO SHOULD INVEST IN INTERNATIONAL MUTUAL FUNDS? 

International Funds invest in economies of different countries, although it offers a good diversifying and growth option to its investors, at the same time, it is advised that amateurs, with a low market and investment knowledge, should think twice before investing in international funds.

If you are a mature or high net worth investor who has already exhausted the domestic equity market, then you may consider investing about five to ten percent of the total mutual fund portfolio in the International Mutual Funds.

The investor before investing in International Funds should get themselves prepared for currency risk, they should get sure regarding their investment goal and investment tenure and once they are done, they can plan their investment in International Funds.

Most importantly, consult a financial planner or advisor, if you are planning to invest in international funds, as the expert's advice always helps to move forward and gain benefit.

As of now, you have understood the concept of International Funds and how it is beneficiary in diversifying an investor's portfolio, which helps them to earn a good return, so don’t wait, meet a financial advisor today and plan your investment in International Mutual Funds.

You can also contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.


Happy Investing!


(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).