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How to invest in international mutual funds

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Investment in an international mutual fund is getting more popular as it is generally believed that all global stocks will not fall together in normal circumstances. Investments in global stocks can be made through direct investments, ETFs, global mutual funds and fund of funds.

How to invest in international mutual funds
Investment in an international mutual fund is getting more popular as it is generally believed that all global stocks will not fall together in normal circumstances. Investments in global stocks can be made through direct investments, ETFs, global mutual funds and fund of funds.
This category is quite popular as investing in global mutual funds, the investors hedge their risk by investing in domestic as well as global stocks. International mutual funds invest in various countries and stocks including domestic stocks. Domestic fund houses also provide access to investment in global companies under various schemes floated specifically for such investments.
All the major fund houses in India provide window for global investments under various schemes. The schemes are well defined and the characteristics of the product offering are defined in the key information memorandum which is approved by SEBI.
The process of investment in domestic mutual funds is established and hassle-free. Investors intending to invest in foreign stocks can go through domestic mutual funds that have schemes mandated to invest in foreign stocks. PGIM India global equity opportunities fund, Nippon India US opportunity fund ICICI Prudential US blue-chip, DSP US flexible equity fund, Aditya Birla life GLOBAL emerging fund are some of the prominent mutual funds that have created a platform for investment overseas.
The investor’s interest in the international mutual funds is reflected by the fact that in the year 20-21 overseas investment increased by 300 percent amounting to Rs 12,400 crores as assets under management folios also jumped steeply to 6.97 lakh. Retail and HNI have invested heavily over the years.
The process of investment is simple and similar to investment in domestic mutual funds. Technology has been the catalyst that has enabled investors to invest in a faster hassle-free environment. In the year of pandemic and lockdown, mutual’s have upgraded the platforms so that there is no disruption.
The investment can be made in Indian Rupees and redemption is in Indian rupees. Investing in an overseas Mutual Fund which is non-domestic has its own challenges in terms of the methodology of payment, foreign exchange fluctuation and taxation. The most preferred investment vehicle is through domestic fund houses as data and performance are readily available.
For investors who have a strong domestic presence the most efficient mechanism is to invest through domestic fund houses who in turn invest through various schemes in foreign stocks. The pattern of investment in international mutual funds is different from that of investments in domestic mutual funds.
An aspect that needs to be factored in this is that it is always better to invest medium or long-term perspective as one foreign stock give a good return over a period of time. Short-term investments in international mutual funds have witnessed volatility and thus should be avoided. Non-resident Indians have the liberty of investment from the country of residency. International mutual funds have delivered a return of 27 percent in the last year. The three-year return is around 12 percent and the five-year return is approximately 13 percent. Investors still have the option to choose country-specific investments through domestic fund houses. There are specific schemes for investments predominantly in US-based stocks. Today the investor is equipped with data wherein fund performance is available along with NAV and returns.
Ease of investing, technology upgrades and low fixed deposit rates have encouraged investors to invest through international mutual funds. The tendency of investors is also to mitigate risks by diversifying their portfolios across global markets and stocks. This is just the beginning as investors would certainly opt for such options as more domestic fund houses launch vehicles to invest allowing them liberty to choose schemes based on performance.
The author, S Ravi is Former Chairman at Bombay Stock Exchange and Founder of Ravi Rajan & Co. The views expressed are personal
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