International Mutual Funds
Investors like to diversify their investments and want new opportunities. Sometimes they want to go beyond the geographical boundaries and venture into international funds. International funds are the perfect option for them. An international fund invests in foreign countries. Also known as foreign mutual funds or overseas funds are there to offer potential with a variety of portfolio compositions and structures.
They increase the chances of higher returns but more risks. In India, the awareness about the IMFs is touching new skies and as an alternative for long term investment, more and more investors have entered as players.
Who Should Invest?
- The major reason being diversification.
- International funds invest in global funds giving the investors a thorough understanding of international markets.
- To maximise the returns and reduce loss, it is better to invest in different countries as each of them have a different economic cycle.
- Keeping in mind the short term as well as long term goals, investment should be made.
Types of International Funds
- Global Funds are the funds which invest in securities all around the world including the country in which we reside. Whereas international funds exclude the country in which we reside.
- Regional Funds invest in companies from a specific geographical region anywhere in the world.
- Country Funds invest allowing the investors to benefit from a specific country’s economy and invest in only one foreign country.
- Global Sector Funds focus on a specific sector in countries around the globe.
Elements to be considered before investing in IMFs in India
- Fluctuations in currency rates affect the NAV. In a US centric international fund if the rupee falls against the dollar, it gives more money per dollar invested as the NAV goes up and vice versa.
- Socioeconomic and political factors bring a need for a certain amount of precaution. Investors need to keep track of the market movements on a regular basis.
- Due to diversified portfolio the returns could be higher as the funds get capitalised in different economies. At macroeconomic level most of the countries have their own economic cycle. The risk too gets shared amongst different overseas markets.
- A qualified intermediary like mutual fund AMC can help as the investor might not be well equipped to know about the foreign country’s economy and industries.
- It could be difficult to know about the companies linked with the funds.
- For tax purposes these funds are considered as debt funds. The rules for LTCG and STCG for debt funds are applicable to these funds.
Recommended funds
- PGIM India Global Equity Opportunities Fund: This Direct Growth fund is an international scheme under the Equity managed by PGIM India Mutual Fund with an AUM of 677 crores. The fund is open ended with Benchmark MSCI All Country World TRI. The fund is 8 years and one month old. It has an expense ratio of 1.34% and exit load 0.5% for units in excess of 10% of the investment for redemption within 90 days. The average returns since launch are 13.04%
- Motilal Oswal S&P 500 Index Fund: This fund has an expense ratio of 0.49% and exit load 1.0% redemption within 15 days. The AUM (fund size) is Rs.740 crores. Average returns by this fund are 26.59% since its launch.
- Nippon India US Equity Opportunities Fund: The average return offered by this fund is 16.6. The fund has an expense ratio of 1.35% and exit load 1.0% for redemption within 365 days. Age of this fund is 5 years 7 months. AUM is Rs. 254 Crores.
Bhoi Smrutirekha Dharanidhar
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