Are you thinking about taking your investment game global? International mutual funds have become a talk of the town for Indian investors lately, especially after some recent ups and downs in the domestic market. In this article, let’s break down what these funds are, how they work, their benefits, the risks, and whether now’s a good time to dive in. Let’s start!
What Are International Mutual Funds?
International mutual funds let you invest in companies outside India, all from the comfort of your home currency. These funds, such as Edelweiss MF, pool your money with other investors and spread it across different countries, regions, or even specific sectors, like US tech or European manufacturing.
With international mutual funds, you get exposure to businesses you use every day but couldn’t invest in directly, like Apple, Amazon, Google, or Facebook. And you don’t need to worry about researching foreign shares on your own. The expert fund manager will take care of everything for you.
Types of International Mutual Funds
Here are a few different types of international mutual funds:
- Global Equity Funds: These mutual funds invest in stocks all over the world.
- Regional or Country-Specific Funds: These focus on a particular region, like Asia or Europe, or even a single country, like the US or China.
- Thematic/Sector Funds: Want a slice of global tech, healthcare, or energy sector booms? These target companies are in specific sectors worldwide.
Why Look Beyond India to Invest in International Funds?
But why should you invest in international funds?
Diversification
The biggest reason is diversification. If India’s markets have a rough patch, overseas companies can act as a safety net, so all your money is not stuck in one place.
When you mix stocks from places that don’t move in sync (like India and the US), bad news in one market will not hit your entire investment as hard. That’s why professionals constantly talk about diversification, and global funds make it possible for retail investors.
Potential for Higher Returns
What if India crawls while the US or China zooms ahead; international mutual funds help you make the most of that opportunity. In fact, in the last year, the global funds category in India gave an average return of around 14%, even when some Indian mutual funds slipped.
Currency Cushion
Investing globally also gives you a currency boost if the value of the rupee goes down. If the rupee falls against the US dollar, your international fund’s value in INR terms could rise, an extra perk when markets are bumpy.
What are the Risks Involved?
It’s not all sunshine and rainbows. Here are a few risks of investing in international mutual funds you must watch out for:
- Currency Risk: If the rupee gets stronger against other currencies, your international funds may lose value, even if foreign stocks perform well.
- Global Volatility: Global events like US elections or China trade policies can cause wild swings in your investments. International funds can sometimes be even more volatile than domestic ones.
- Regulatory Differences: Rules, taxes, and accounting standards differ from country to country. This can affect how companies report profits and how your investments are taxed.
Experts suggest using international mutual funds for about 5-10% of your overall investment portfolio. Don’t go all in! Start small, learn how global markets move, and scale up if you’re comfortable.
Conclusion
So, is it time to diversify with international mutual funds? If you want your investments to have a global flavor, get into big-league companies, and stand strong when Indian markets wobble, then this is an option worth exploring.
Just remember the risks, keep your expectations real, and start slow. With the world at your fingertips, why not add a little international twist to your investing journey? Happy investing!