International funds? Most investors can profit from some overseas investment exposure. It allows people to invest in exciting and distinctive firms and industries that aren’t available on the Indian stock exchanges.
In addition, several international markets have a minimal correlation with our Indian markets. This minimal correlation reduces portfolio volatility and guarantees adequate diversification, particularly in mature markets. That’s not to mention that they operate as a hedge against the rupee’s depreciation. However, consider that investing in overseas funds is more about diversification than return maximisation. International funds should be considered only when you have a well-diversified local (Indian) mutual fund portfolio.
What percentage of your budget should go toward international funds?
It’s best to keep the number of funds in a very modest portfolio to a minimum and stick to Indian mutual funds. Consider adding some overseas funds to your domestic MF portfolio once it is well-diversified.
To get a respectable level of regional diversification in your entire mutual fund portfolio, you can allocate 10-15% to international equities funds. If you have no international experience, 10% is an excellent place to start. Also, this does not have to be accomplished on the first day. Instead, you can improve your position over time. Many investors may consider having 15-25 per cent exposure to international funds in certain circumstances.
Where should you put your money in international funds?
As a first step in investing in foreign geographies, it is critical to comprehend each geography’s risk-reward profile. You must reduce your search to one or two overseas funds. There is no need for you to have more than two international funds. It is preferable to select developed countries with little association with the Indian market. The United States is one of the developed countries to consider. The next step is to decide the fund category you want to invest in from the US market. Other markets to explore are Europe, China, Japan, and Brazil.
Today, investors seeking foreign exposure have a plethora of possibilities. However, your goal should be diversity rather than huge profits; you should not invest in many of them.
Is it better to invest in active or passive foreign funds?
If you’re looking to invest in international funds focused on established markets like the US, I believe passive index funds/ETFs are the way to go. Active managers cannot routinely beat indices such as the S& P500 and Nasdaq due to the maturity of developed markets.
So why take that chance in the first place?
Invest in passive index funds for foreign stock investments in developed markets. If you decide to invest in developing and emerging markets, you can choose between active and passive funds depending on your needs.
More than 50 international funds/ETFs are accessible for Indian investors, with a combined AUM of more than Rs 40,000 crores.
You must stick to a well-thought-out asset allocation strategy for foreign investment, but do it with care and caution. Indian investors have begun to explore opportunities in the US market. As a result, many fund institutions are offering foreign investing strategies. It is recommended that you learn the benefits and drawbacks of each programme before making an investment decision.