International Funds are funds that invest primarily in the stocks of foreign companies and are listed in foreign markets. Nowadays, investors seek the geographical diversification of their portfolios. International mutual funds in India give investors the opportunity to invest in companies and fund houses located around the world. Despite having a high-risk exposure, these funds generally have the potential to ensure high returns.
Different Types Of International Mutual Funds
As such, there is no fixed classification of international funds. There are many different international funds available to investors in India. They all take a different approach when it comes to international investing. A few of them are:
- Thematic International Funds: Similar to domestic thematic funds, these international funds follow a theme-based investment strategy. For instance, an infrastructure-themed domestic thematic fund will invest in the stocks of steel, power, and cement companies. Similarly, a thematic international fund will invest in shares of overseas companies that are associated with the theme.
- Regional Funds: A regional fund is a fund that invests in securities throughout a particular geographic region, such as Europe, Asia, etc. The majority of investors invest in these funds to diversify their portfolios for regions about which they have extensive knowledge.
- Country Funds: A country fund is a fund that invests in a particular country. For instance, a country fund for China would invest in their local stocks and securities.
- Global Sector Funds: A global sector fund invests in specific sectors in an overseas country. This enables investors who are interested in a particular sector to invest and profit from it.
Features Of International Mutual Funds
- Diversification: Due to their global investment in equity and debt securities, international funds provide investors with a fantastic opportunity to diversify their portfolios. This also makes it possible for investors to profit from the domestic market conditions of the respective country.
- Risk: Due to the fact that the investment portfolio is comprised of securities from a foreign nation, it becomes difficult to constantly monitor the social and economic conditions of that country. In addition, sometimes it is difficult to obtain accurate information regarding their market movements. This increases the risk exposure of international funds.
- Professional Management: Monitoring the global markets in real-time is crucial because it’s essential to keep track of their movements. Therefore, the investments are managed by fund managers with years of experience in managing such investments.
- Exposure: International Funds invest in equity/debt instruments of various countries, which enables them to capitalize on their investments by taking advantage of the changing conditions of every country.
Also, by investing in international funds, you can become a shareholder in multinational companies. With Kuvera, you can diversify your portfolio by investing in the best international mutual funds.
Factors To Consider Before Investing In Foreign Funds
For an investor looking to gain from investing in an international mutual fund, it’s critical to have a solid understanding of the global financial market. They must conduct thorough research before investing. Several points to consider before investing are:
- Research: Always do research on the mutual fund scheme with regard to its credit risk, default risk, past performance, risk category, and allocation of funds to different sectors.
- Selection: Choose a country based on a number of factors, such as stable and well-developed stock markets, a powerful legal system, and strong corporate governance.
- Risk Associated: The stock market of a country is significantly influenced by both economic and political factors. Therefore, political or economic unrest could be detrimental to your investments. Changes in political or economic conditions may have a negative impact on your investment in foreign funds because they invest in other countries.
Frequently Asked Questions (FAQs)
- How to invest with Kuvera?
Kuvera is the one-stop solution for all your investments and financial goals. You can diversify your portfolio with Kuvera.
- Download the Kuvera app or visit the official website.
- Create your account on Kuvera by completing the mandatory KYC procedure. Once it is completed, select the ‘Invest’ option on the homepage, after which you can select ‘Invest in Global Markets’.
- You can now explore the list and select the plan accordingly. Both lumpsum and monthly SIP options are available. With the SIP option, you can start investing with typically Rs. 500 per month.
- Who should invest in International Mutual Funds?
- Looking for opportunities in various markets: Different markets perform differently during a given time period. There have been instances when US markets performed exceptionally well while Indian markets performed poorly. Investing in fund of funds allows investors to profit from other markets, whether domestic markets are performing well or not.
- Long-term horizon: International funds can help investors meet their long-term goals, such as retirement or the education of their children, with a sizable corpus. Investors are protected against the volatility of equity markets by having a long-term investing horizon. One must have a long-term investment horizon in order to take advantage of the benefits offered by international funds.