Imagine putting all your eggs in one basket. If the basket drops, you lose everything. The same concept applies to investing. If you put all your money in one stock or market, the risks of losing everything rise substantially. You may believe that diversifying with domestic assets offers enough safety and simplicity. But why limit yourself to just one economy when you can take advantage of global opportunities?
In today’s interconnected global economy, there are more opportunities than ever to put your money to work in international markets. One such opportunity is offered by international mutual funds.
Reasons to invest in international mutual funds
While Indian markets offer substantial opportunities, international mutual funds can be a valuable addition to your portfolio for several reasons.
Global exposure: Think of international funds as your passport to global markets. You get exposure to global giants like Microsoft, Apple, and Meta, and opportunities that aren’t directly available to Indian investors. As an Indian investor, if you feel bullish about tech giants like Apple or Amazon, international funds offer a direct avenue to invest in these global leaders.
Risk mitigation: When Indian markets experience turbulence due to local events or economic policies, a foreign market might not feel this impact. By holding assets in both markets, the risk gets spread out. If one market faces a setback, another might soar, striking a balance in your portfolio.
Access to niche sectors: Some sectors might not have a strong presence in India but dominate overseas. Electric vehicles serve as an example. While India has just begun its EV journey, companies like Tesla have marked their territory abroad. International mutual funds grant access to such specialised sectors.
Currency appreciation benefits: When the Indian rupee weakens against the US dollar or the euro, and you hold assets in those stronger currencies, the value of your investment rises. It’s a double win – from the asset’s growth and the currency’s strength.
Emerging market dynamics: India represents just one of many emerging markets. Countries in Southeast Asia or Africa might have unique growth stories unrelated to India’s trajectory. By investing in funds focused on these regions, you can become a part of their growth.
Steps to invest in international mutual funds
Online platforms and applications allow easy investment in mutual fundsfocusing on international assets. Here are the steps you can follow:
- Opt for a mutual fund investment app or choose a fund house’s official website.
- Complete your registration and use your credentials to log in.
- Find the ‘mutual funds’ section on the platform.
- Identify an international fund that aligns with your goals.
- Hit the ‘invest’ option. Now, specify the desired amount and your preferred investment style. It can be a systematic investment plan or a lump sum investment.
- Provide KYC details and bank information. Now confirm your details and authorise your transaction.
Another alternative: Indian brokers that have tie-ups with international brokers
Some Indian brokers maintain partnerships with international counterparts, allowing you to make investments abroad. If you already engage with a broker for local investments, you can ask if they offer access to international markets through such tie-ups.
However, certain restrictions might exist. Some brokerage firms may impose restrictions on specific foreign investments or the number of trades allowed. Carefully assess these limitations, as they may affect your potential returns.
Investing beyond borders: Leveraging the potential of international funds
With a combination of growth, diversification, and currency benefits, international funds can be a valuable component of your portfolio. Make sure to consider factors like currency exchange rates, geopolitical risks, tax implications, and the fund’s historical performance in different markets. This will help you make calculative decisions and maximise your opportunities for growth.
For a personalised approach, consult with a financial advisor. They can assess your age, income, goals, and risk appetite to suggest strategies to maximise returns and reduce risk. With their insights, you can align international funds with other equity funds, bonds, real estate investment trusts, gold, and individual stocks and create a resilient portfolio. Remember, while international funds present new opportunities, the right guidance can amplify your chances of success.