Types of International Mutual Funds in India
One of the biggest limitations in the equity investment space is geographical. While there are some ways to invest in international companies directly, they are complicated and tend to attend higher fees that could offset your profits. International mutual funds offer a reasonable solution to this problem. By investing in international funds, you get to make use of the growth of international companies in a much more regulated and safe manner. Let’s learn more about international funds and explore the categories of funds you can invest in
What are international mutual funds?
International funds have a portfolio focusing on equities of international companies. Like a regular mutual fund, these funds will also be managed by a fund manager, who keeps the portfolio according to the character of the fund. When you directly invest in foreign stock, it could attract a higher trading fee in a foreign currency. Because of the rupee’s conversion value, this charge could become significant. But when you invest in these stocks through an international fund, the expense ratio tends to be similar to that of a typical mutual fund.
But one problem a few investors might face is regarding customisation. For example, when you buy stocks directly, you can buy the stocks of your choice to create a customised portfolio. But with mutual funds, the choice will depend on the fund manager. But investing in a fund with a character similar to your investment horizon might be a solution. So let us examine different types of international mutual funds in India to find the right match for you.
Global funds are the most diversified option of international funds. Their portfolios contain securities from all around the world, including India. The securities are chosen according to the character of the fund. For instance, a technology-based fund would focus on stocks of information technology companies worldwide.
The diversity this fund offers can make it a less risky investment option. It is mainly because since the economic conditions around the world could differ, a downfall in one or two regions will only have a minor, diluted effect on the whole portfolio.
These funds focus on securities from a particular region. A region may not be limited to a country. This helps regional funds, too, have a more diversified portfolio.
As the name suggests, country funds invest in securities of a particular country. This makes country funds an excellent opportunity to bank on the growth of a particular sector in a country. For instance, many investors see more development in the technology sector in the U.S. By investing in a country fund that has its focus on the U.S, you can bank on the same to grow your money.
Global sector funds
But what if you want to invest in a sector globally? For that, there are global sector funds. They help you invest in stocks of a sector showing potential worldwide. For instance, travel and leisure stocks expect a boom as the pandemic scare subsides significantly. This effect is likely to be global, and you could gain profits by investing in a global sector fund.
Why should you invest in international funds?
Now that you understand different types of international funds, below are some reasons why you should consider investing in them.
- It gives your portfolio geographic diversification.
- It is a cost-effective way to invest in international companies.
- Experts in the field handle them.
Before you invest in international mutual funds, you must talk to a financial expert and figure out your investment horizon. This will help you find the right fund for you and make you able to get the best out of your investment.