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International Funds

  July 4,2020

What are International Funds? Should you invest in International Funds?

We all use Google, Facebook, and Amazon on a day-to-day basis. But have you thought about investing in these companies? International funds lets you invest in international stocks easily in a systematic manner.

In this article we will know more about international funds and the different aspects of international funds. 

What are international funds?

The international fund is a category of mutual fund that invests in international companies that are not listed in Indian exchanges. The fund invests in the stocks market of the foreign countries such as USA, Brazil. These funds offer an opportunity to invest in the overseas markets.

Some international funds invest in the stocks of US, Europe, Brazil, China, Japan and other markets. Other international funds invest in companies of a particular field such as agriculture, mining, technology.

International funds provide geographical diversification in your portfolio. It helps to reduce the risks associated with the home country and gain from the returns generated by other markets.

By investing in these funds, you can invest in some of the biggest companies in the world such as Facebook, Google, Amazon and Netflix.

Importance of international funds

  • As international funds invest in international markets, it provides portfolio diversification for theinvestors.
  • International funds minimises losses. The economic cycle varies among different economies. Also, some news and events are specific to particular countries. As a result, international funds help to minimise loss.
  • These funds also help to take exposure in a different currency. When rupee depreciates, it can increase the returns generated by international investments.
  • Investing in international stocks and constant monitoring of the stocks may not be a task easy for retail investors. International funds offer professional fund management for individuals. Fund managers track the performance of the stocks and take necessary steps.
  • Investors of international funds don’t have to worry about tax-related issues such as capital gains and dividends. The taxation of international funds is like debt funds and all the information related to the investments is sent by e-mail on a regular basis. Investors can track and monitor the updates easily. 
  • There are different types of international funds. These funds invest in a particular international geography, sector or strategy. Investors can select the fund of their choice.
  • Liquidity is an important factor that needs to be considered when investing. These funds are liquid and investment proceeds are credited to the bank account within a few days.

Who should invest in international funds?

  • International funds are suitable investment options for investors who are adequately invested in Indian equities and looking to diversify their portfolio.
  • Sophisticated investors who understand the risk associated with international funds.
  • Individuals who are investing for their children’s foreign education can invest in these funds to hedge any future rupee depreciation.
  • Investors whose investment horizon is over five years can invest in international funds.

Types of international funds

As discussed earlier, international funds based on their investment portfolio can be classified into various factors. Here are some types of international funds.

Regional Funds

The regional funds invest in countries as per the geographical location such as Asian countries, European countries,etc.

Country-specific Funds

These funds only invest in companies of a particular foreign country such as China, Japan, etc. across the different sectors.

Global Sector Funds

Global sector funds invest in a particular sector or industry across different countries. These funds may invest in sectors such as real estate, gold, and natural resources companies.

How to invest in international funds

International funds, just like any other equity fund, should be invested in a systematic manner through Systematic Investment Plan(SIP). Ideally, investors should not have over 15-20% of their portfolio invested in international funds. Also, it is important to check for any related exposure in the current portfolio.

As international funds differ from Indian funds and requires research, it is better to take an advisor’s advice before investing in international funds.

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