It’s rainy season, and you want to spend your day binge-watching your favourite global shows, from Korean Dramas to Friends, to fill the day with entertainment. But you are here streaming Friends, but there is yet another friend awaiting your attention: International mutual fund investment. If watching international shows is in fashion, why not flex your investment with International mutual funds to generate revenue from the global market?
International mutual funds investment is an ideal way for investors to take complete advantage of investment opportunities in global markets where stakes are high. So a little break from binge watching and giving attention to international mutual fund investment will be completely worth it in the long run.
Don’t worry—you do not need a long break from your entertainment mood to learn about international mutual funds, just few minutes. Keep reading to learn everything.
What are International Mutual Funds?
International Mutual Funds are among the impressive investment options that offer convenient opportunities for investors to invest in securities of companies based in foreign countries. This type of investment option gives you a flexible hand to bet on high stakes of global economic growth and access international markets.
Mutual funds managing international investments are handled by professionals who are experts in investing abroad.
How Do International Mutual Funds Work?
Investing in International mutual funds does not demand any rocket science understanding. It works in a similar way to investing in equity mutual funds in any other country. Investments are done in Indian Rupees. Fund managers handle investments in stocks listed on exchanges outside India on behalf of investors.
An investor’s portfolio can be built by fund managers buying stocks directly from these companies. If the investors prefer, there is also the option of investing in a pre-designed global fund with foreign stock holdings.
What Are the Types of International Mutual Funds in India?
Those seeking global investment options in India will find a variety of international funds to choose from. Investing in international funds is approached in three distinct ways, which can be classified into four categories:
1. Global Funds
Global funds are types of investment options where investors are invited to invest in stock of companies listed on global exchanges. This allows investors to boost their portfolios with stocks from every corner of the world. With this strategy, investors may ensure their portfolio is diversified geographically. Hence, if one of the markets is underperforming, you have another region on the table that may offer the right balance and backup for the whole portfolio.
2. Thematic International Funds
Thematic funds operate similarly to domestic thematic mutual funds in that they use a theme-based investment approach. An infrastructure fund, for example, might invest in the stocks of cement, power, and steel companies. An international thematic fund invests in foreign companies relevant to the theme focusing on a specific field.
3. Country or Region-Specific Funds
The funds invest either in a regional stock market or one of a country’s stock markets. Among international funds, one might only focus on US stock markets, whereas another might target Asian markets such as Japan, China, or Taiwan. Investing in these markets presents Indian investors with several opportunities for achieving favorable returns.
4. International Fund of Funds
These international funds are mutual funds managed by domestic asset management companies. They primarily invest in international exchange-traded funds or other foreign funds. Since these funds are backed by international companies, the underlying assets are foreign stocks despite being invested in a domestic fund house.
What Are the Benefits of International Funds?
Investing in international funds has grown in popularity recently in the globalized world. Several reasons contribute to the preference of Indian investors for international mutual funds.
1. Increasing diversification
The ability to diversify geographically is one of the most significant advantages of Indian international mutual funds. Economic worlds fluctuate, causing their capabilities to shift in several instances. Essentially, if the Indian economy struggles sometimes, other countries’ economies, such as those of China, the United Kingdom, and the United States, may flourish. Choosing the right foreign mutual fund in India prevents investors from suffering losses in their home countries.
2. Developing professional skills
There are many instances where investors do not possess the knowledge or experience necessary to effectively manage their portfolios. However, foreign funds give them a deeper understanding of geographical diversification in portfolios, allowing them to manage them more effectively.
3. Liquidity
Liquidity is one of the key benefits of international mutual funds. Upon selling their shares, stockholders will receive a market value equal to their investment.
4. Investing is convenient
Investments made through international funds are often considered convenient due to their administrative aspects. When investing in this fund, all information regarding account statements, dividends, capital gains tax status, etc., is sent to investors via email. Using it, they can keep track of their activities without any hassle.
5. Ownership of global markets
Most investors aspire to own the global market through their investments. Investing in international mutual funds in India enables them to achieve such a dream. The company offers stocks from Adidas, Apple, and Facebook, among the most well-known companies in the world. Investments of this kind often have a motivation behind them.
Taxation subjected to International Mutual Funds
International funds consider equity investments as underlying assets, but their taxation is subject to some anomalies. In many ways, these global funds have a similar taxation system to the debt funds in India. When investors sell their investments, they can make capital gains.
1. Short Term Capital Gain (STCG) Tax
Investors who redeem their international fund investments within 24 months become STCGs. Investors must then add these gains to their income and pay taxes. A tax bracket is determined according to the investment characteristics of the investor.
2. Long Term Capital Gain (LTCG) Tax
Investors whose international fund investments persist for two or more years will realize LTCG. As soon as the profits come into the picture, they are taxed at 12.5%.
What are the best ways to invest in international mutual funds?
Choose a fund
It all starts with selecting the types of mutual fund that exceeds your investment objectives and tolerance for risk. There are lots of things to consider when you decide to choose a fund for international mutual investment. Some of them are:
- Fund History
- Portfolio holdings
- Geographical or industry focus.
Set up an account
Investing in international funds requires opening an account through a broker or financial institution. Choosing the right platform for international investing should be seamless.
Get your account funded
Make a deposit into your account after it has been set up. Shares will be purchased in international mutual funds with the funds.
Invest in shares
Once you have funds in your account, you can invest them in the international mutual fund you chose. Ensure the fund you invest aligns with your financial goals and overall investment strategy.
Keep an eye on your investments.
Invest in international mutual funds and monitor them regularly afterward. Ensure that your portfolio stays aligned with your investment objectives by staying on top of performance, monitoring changes in the value of your investment funds, and adjusting your portfolio accordingly.
Conclusion
International funds set the future of mutual fund investment, offering an exceptional chance to diversify your portfolio while maximizing the possibility of higher returns. From increased returns to exposure to the global market to mitigating risk, International mutual funds are great for creating an impressive financial future. Get ready to give hi-fi to your new investment friend with international mutual funds.
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Disclaimer: This article is for educational purposes only and does not intend to substitute expert guidance. Mutual fund investments are subject to market risks. Please read all the scheme-related documents carefully before investing.
