Over the past two to three years, Indian investors have started to invest more and more in international mutual funds, predominantly in foreign equities and assets linked to equities. The same is not valid for international funds. However, investors in domestic mutual funds typically have easy access to crucial data about domestic schemes, such as the market cap, expense ratio, fund portfolio, etc.
What Are International Mutual Funds?
Investments in the stocks of overseas corporations like Apple, Amazon, Deutsche Bank, Barclays, Fiat, Novartis, etc., are made through Indian equity funds known as international funds. Thanks to international mutual funds, you won’t have to deal with the laborious and difficult chore of selecting certain overseas stockss. Investing in a global fund is as simple as any other mutual fund. With the help of the fund’s international holdings portfolio, a fund manager performs that on your behalf. That’s not all, however.
Top things to check when investing in an International Mutual Fund
Ensure it promotes diversification:
You already own a portfolio of investments that exposes you to various assets and entails a certain level of risk. Ensure the overseas mutual fund you select lowers your portfolio’s overall risk and prevents concentrated exposure.
Invest with a long-term time horizon:
If you decide to invest in international equity funds, you should preferably have an investment horizon of at least 5 to 7 years. Risks associated with international investments include currency risk and geopolitical risk. Holding such assets for at least 5 to 7 years is preferable to ensure these risks do not significantly affect your portfolio.
Compare capabilities:
Although previous success is never an assurance of future performance, evaluating schemes and looking into the managing fund management teams, their consistency, and AMC’s reputation could be a great idea.
Look at the expense ratio:
International mutual funds typically charge a greater cost ratio than domestic mutual funds for managing the fund. Before choosing an investment, make sure to look at the expenditure ratio.
Choose the category that most closely matches your needs:
Many themes and options exist. For instance, you may invest in a US technology fund to profit from the expansion of US technology companies. Alternatively, you could put money into regional funds like US or Greater China equity funds. However, you should research the risk and return possibilities category before investing.
3 Types Of International Mutual Funds In India
Index Funds
International index funds follow a specific index, such as the FTSE 100 or the S&P 500. The index they are tracking will be reflected in their portfolio. For instance, an S&P 500 index fund will contain all of the index’s stocks.
In general, index funds aim to produce returns comparable to the market. Additionally, their investing fee is relatively cheap because most index funds are handled passively.
Fund of Fund
Instead of purchasing and selling stocks directly, an international fund plan invests in other mutual fund units. Remembering that pension funds can invest in numerous mutual funds is crucial.
Feeder
An international feeder fund, which has just one parent fund known as the master fund, is conceptually similar to a fund of fund structure.
A feeder fund transfers money from various investors to the central fund.
Conclusion
Minimizing overall risk and maximizing overall profits, including international funds in your investment portfolio, can provide you with several substantial benefits. It would be best to consider investing in and maintaining a long-term position in international mutual funds utilizing a systematic investment plan, or SIP, similar to domestic mutual fund investments.
