Finance

WHY INVEST IN INTERNATIONAL MUTUAL FUNDS?

Do you wish to diversify your investments across location? International funds could be a good investment option for you. Investing in international funds can be a good way to not only diversify your portfolio but also find new investment opportunities. Everyone seems to be in love with these funds. Mutual fund experts and fund managers often go on and on about international funds. But, how are international funds different from other funds and what makes them special? This article acts as investment guide for investors who are new to international funds. Read on to understand why you should invest in international funds.

What are international funds?

International mutual funds are a type of mutual funds that invest largely in foreign companies which are listed on the overseas markets, excluding the investor’s country of origin. Also known as foreign funds or overseas funds, investors prefer investing in international funds to benefit from the share market rallies on significant stock market exchanges around the world. It goes without saying that it also provides the much-needed diversification factor to an investor’s portfolio. International funds in India are dedicated to the Asian, European, US, China, Brazilian, etc. are some of the emerging markets among others.

Types of international funds

International funds are broadly classified into the following types:

  1. Global funds
  2. Country funds
  3. Regional funds
  4. Global sector funds

International funds benefits

Diverse markets and often move independently. Hence, international funds offer an investor with the prospect to invest in any particular economy that is performing well at any given point. Following are some of the pros of investing in international mutual funds:

  1. Helps to diversify your investments
    International funds are a great investment option for investors who wish to diversify their portfolio across location. These funds provides investors access to markets which would otherwise be hard to invest in.
  2. To balance economic volatility

Investing in diverse economies helps to achieve substantial gains by overcoming economic cycles. Thus, foreign mutual funds help to balance economic volatility.
This annuls the losses that might occur from economic volatility by profiting from better performing economies.

  1. To act as a hedge against falling currency
    Investing in overseas funds act as a hedge against the underlying currency of investor’s country of origin. For instance, when the rupee falls against the dollar, if you had invested in US markets, you would have achieved significant gains.
  2. Access to international blue-chip companies
    With international funds, you can get exposure to foreign markets. There are various corporate giants such as Google, Microsoft, Apple, Cola, Royal dutch shell, etc. whose stocks are not listed on the Indian stock markets. Foreign funds aim to bridge this gap and offer investors with international exposure.

Are you an ideal investor for international funds?

International funds are ideal for investors looking to diversify their investments across location. These investors wish to diversify not just across domestic markets, but also overseas markets. Although international funds have a huge potential to gain substantial returns, these funds are considered to be risky investments. Hence, risk-averse investors should refrain from investing in international mutual funds.

Before investing in mutual funds , an investor must ensure that they have a proper understanding about the pros and cons of investing in mutual funds. Before investing in international funds, one must not forget the tax implications that are associated with international funds. Hence, it’s important to factor in post-tax returns before committing to any type of mutual funds. Happy investing!

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