International funds undoubtedly add an element of geographical diversification to mutual funds. In India, of course, different types of mutual funds exist. Nevertheless, all of them are brought under three main types. They are hybrid, debt and equity mutual funds.
What are International Mutual Funds?
International funds are funds that invest in debt and equity instruments in companies listed outside India. These funds are also referred to as foreign or overseas funds. If you are an investor looking for long-term investment, you can prefer this fund as an alternative in your investment portfolio. It invests its accumulated money in the stock market of countries like Brazil, Canada, the USA and the UK.
Nowadays, people show interest to invest in mutual funds with portfolio diversification. So, international fund investment is gaining importance in India. A diversified plan in addition to spreading the risk also allows getting into different markets, risk classes and sectors. The good thing about this fund is that it benefits from international stock markets. Nevertheless, it is better to understand the movement of the market and economic changes in a country before investing. The reason is that these factors can affect the return you get from the international funds.
Who Should Invest in International Funds?
Investment in international funds is best suited for smart investors. This investment is attractive because of the diversification possibility. It will ensure smoother returns. Also, are you looking for exposure to international markets? Yes, it will help with broadening your expertise and experience. In this case, investing in an international fund can be the right choice for you.
Nevertheless, international funds are not for passive investors. The reason is that they will have to keep a continuous watch on the market. They should be sure of their short-term and long-term investment goals before investing. When investing in international funds, these investors will have to check the track record of the funds to ensure the safety of their money.
Why Invest in International Funds?
Higher Diversification:
When your portfolio has only domestic equity and debt mutual funds, your money will be invested only in Indian companies. But, when you have international funds in your portfolio, you can gain additional diversification. Above all, with no or little influence on domestic market conditions, your portfolio can gain better stability.
Not only domestic diversification, you can even achieve currency diversification. This becomes possible by investing in international mutual funds.
Opportunity to Become an Owner of International Market Leaders:
When you invest in international funds, you will get the opportunity to become an owner in some of the biggest businesses. You can get the chance to become the owner of world-known companies like Apple, Adidas and Facebook. In addition to being an owner, you can continue to be a customer of these popular brands. But, you will continue to get a share of the profits that these companies make.
Hedge Against the Risk of Rupee Value Depreciation:
India is an emerging market. So, the currency of our nation is weaker as compared to leading international currencies like Euro and US Dollar. People with liabilities or cash outflows in a foreign currency will experience an impact by depreciation in rupee value. But, when you invest in international funds, a portion of your portfolio can gain the deserving strength from foreign currency. In turn, exposure to foreign currency gets hedged. Above all, any reduction in the value of INR will improve the returns you generate in terms of the dollar. The reason is that it will bring a hike to the per-unit value of your investment. In short, when you invest in international funds, you can expect returns from two sources. One is from the investment itself, while the other is from the depreciation in the value of Indian National Rupee.
