Investment diversification is key to building long-term financial health and investing across different asset classes. For those looking to extend their portfolio’s reach beyond geographical boundaries, international funds can be an ideal solution – providing access to innovative strategies in international markets and the growth and success of global companies.
International mutual funds invest in stocks, bonds, or other securities of foreign markets that are not publicly listed in India and are not directly available to Indian investors. If you already invest in the Indian stock market, investing in foreign companies through international funds can be a step up for your portfolio.
Why invest in international funds?
1. Geographic diversification
Investing in international funds is an important part of a diversified portfolio, as it provides an additional layer of risk mitigation by providing exposure to foreign markets. This also broadens the scope and nature of the investments, allowing for stronger portfolio management strategies by spreading out risk and returns across multiple countries’ stocks. Such a strategy is often considered practical and prudent, as it offers enhanced sustainability and protection.
2. Hedge against rupee depreciation
The correlation between Indian and global markets is low. Thus, with international funds, not only can you access potential high returns on different classes of investments but also have the assurance that your capital is protected from devaluation or depreciation of the Indian currency against stronger foreign currencies. This reduces the risk for you and may help to gain higher returns than what prevailing conditions could offer in the domestic market.
3. Exposure to high-growth international opportunities
International funds provide access to various fresh investment themes, such as new and innovative business opportunities that may not be prevalent in the domestic market. This allows investors to take advantage of global trends and movements within the investment markets, offering new chances for diversification and potentially better returns.
4. Professional management
Investing in international funds through mutual funds allows you to benefit from the expertise of professional portfolio managers. These experts have years of experience in selecting the best mutual funds to invest in and carefully managing your investments to ensure maximum returns while still taking into account various market risks.
How to invest in international funds?
Mutual funds routeÂ
You can invest in mutual funds focused on international funds through the online portal of several mutual fund houses. The steps are:
- Install a mutual fund investment app or visit the official website of your selected fund house.
- Register yourself and log in.
- Navigate to the ‘Mutual funds’ sections.
- Select the international fund you want to invest in.
- Click on invest and enter the amount and investment mode (Lump sum or systematic investment plan)
- Complete your KYC details (Aadhaar/PAN, bank details) to confirm your investment.
Through Indian brokers having tie-up with international brokers
Many Indian brokers have tie-ups with international brokerages and can facilitate overseas investing. So, it would be prudent to check if your existing broker offers such services or if they have any tie ups in other countries.
While this type of access provides opportunities, some restrictions may apply based on the brokerage firm, such as restrictions on certain investments or the number of trades permitted. Before investing internationally, make sure you evaluate such restrictions which could limit your earning potential.
Through international broker
You can also invest in international funds by opening an account with a foreign broker. These brokers also provide research and analytics support to help you make informed decisions when selecting the right investments overseas. Depending on the subscription fee, some brokers may even offer trading advice to their clients, which can prove invaluable when making smart investments overseas.
Closing thoughts
As an Indian investor, you now have opportunities to take advantage of international markets through mutual funds, ETFs, and overseas trading accounts. However, it is important to remember that with each method comes additional charges such as expense ratio or management fees, redemption fees, brokerage charges, etc. So, remember to factor this into your decision making process!
