The most widely accepted rules in the investment world is not to put all your eggs in one basket. Building a diversified investment portfolio spread across different investment options, themes, sectors, and geographical borders is necessary. In India, international diversification has recently gained traction as many investors seek growth opportunities overseas. They understand that the Stock Markets perform differently in each country.
An International Mutual Fund is a scheme investing in companies listed on foreign stock exchanges and regulated by the SEBI. Over the years, India’s interest and awareness of foreign financial markets have rapidly increased. Investors are also aware of global diversification, which you can easily manage with International Funds. Consider these funds for investment:
Regional Funds
They are a type of Mutual Fund Investment in the Stock Markets of a specific region or country. For instance, an International Fund invests in the US Stock Markets or Asian markets. They focus on capitalising on the opportunities generated by these markets to reap potential returns. This fund can help you invest in their companies and diversify your portfolio across geographical borders.
Despite the risk, the idea is to earn relatively higher returns as emerging economies have higher growth potential than developed economies.
Thematic Funds
Sectoral and Thematic Funds invest in stocks of foreign companies that belong to a specific sector. Some common sectors to invest in are mining, technology, real estate, oil and gas, pharma, and healthcare. If an International Fund of Funds has infrastructure as its theme, it will invest in stocks of cement, power, and steel companies.
Global Funds
They are a type of International Fund investing in companies around the globe. Global Funds are ideal for investors who wish to take advantage of global foreign securities without concentrating their portfolio within a specific region. This exposure minimises the investment risk associated with a particular country or region.
Who should invest?
International Funds are meant for investors seeking geographical diversification and aiming to gain from the growth of different economies. It allows you to participate in the development of global companies. However, you should have a high-risk appetite and invest for the long term. You can also select the Systematic Investment Plan route to hedge your investment portfolio against risk from a single region while benefitting from local currency devaluation.
To mobilise a massive corpus for fulfilling your long-term goals like retirement, a child’s education, etc., invest in an International Mutual Fund. A long-term investment of minimum five years protects you from Equity market volatilities while reaping the benefits of compounding.
Conclusion
Investing in International Mutual Funds is like any other Equity Fund. You invest in rupees, and the fund units get allocated. The fund manager handles the money and invests it in the stocks of companies listed on foreign exchanges.
