October 29, 2020

Surf Gossip

Forget the rest

International Mutual Funds: Should You Invest?

International mutual funds are usually funds that invest in global markets. These funds generate income by investing either in funds that invest in international markets or directly in different equity markets across the globe. Those who have been seeking capital appreciation in equity and equity related securities of companies worldwide can consider investing in international equity funds. Apart from equity, a global fund may also depend on debt or liquid securities to provide the fund a touch of diversification and liquidity both.

Investors are expected to consult their financial advisor before investing in global funds. International mutual funds invest in securities of companies that are listed outside India. These funds invest in foreign markets. If you are someone who doesn’t understand how global markets work then they should reconsider international funds. All global funds are owned and administered by Indian AMCs as per guidelines set by market regulator SEBI (Securities and Exchange Board of India). A mutual fund portfolio should always remain diversified. If you already have a couple of equity and debt funds in your investment portfolio, you can add an international touch to it by investing in global funds.

Although global funds give investors an opportunity to generate income through investments in foreign markets, there are differences when it comes to the functioning of local equity funds. As usual, investors are allotted units depending on the investment amount and depending on the fund’s existing net asset value (NAV). If you are seeking capital appreciation over the long term to fulfill your life’s financial goals you can start an SIP in global funds. A systematic investment plan is the modern way to invest in global funds. One does not need a large capital to invest in global funds via SIP. If the monthly investment amount tallies the minimum investment amount mentioned in the fund’s offer document one can continue investing this small amount at regular intervals in global funds till their investment objective is achieved. Investors can also refer to an online SIP calculator to determine how much money they need to invest systematically to get closer to their ultimate financial goal.

Is investing in international funds a smart choice?

Here are some of the reason investors should consider investing in international mutual funds:

Access to global markets

Global economies have already entered India. There are several products and services that we as Indians consume on a day to day basis. Be it a search engine, a smartphone, an apparel or a home appliance, we consumers brands that are recognised globally. Wouldn’t it be natural for someone to invest in a company whose products or services you have been availing for many years bows? Due to advent in technology and positive progress in investment methods has made it possible for us to invest globally from the comfort of our homes.

Different markets different circles

Now you might be thinking what’s the point of investing in an international equity fund when you already have invested in Indian equities. Do understand that markets don’t move in tandem. If equity markets in India are outperforming, the foreign equities may underperform and vice versa. This only helps us further understand that global and Indian equity markets do not move in tandem. If one market underperforms, the investments in the other market may be able to even out the losses.

Hedge against the depreciated INR

We all know that the rupee has been depreciating for quite some time now. International funds give you an opportunity to invest in a foreign currency depending on which global fund you choose. Investing in international funds can actually work as a hedge against the underperforming rupee which has depreciated down to 6 percent alone in the year 2020.

Like all mutual funds, investments in international funds come with their own set of risks. Investors should determine their risk appetite before investing in mutual funds.