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Should You Invest in International Mutual Funds?

Jagrity Sharma Jagrity Sharma 24 June 2019

Mutual funds are of various types and international mutual funds are just one of them. However, before investing in international mutual funds, you should know whether they suit your investment strategy or not!

International Mutual Funds

Mutual Fund is one of the best investment tools for multiplying your investments. Investing in an international mutual fund is a way by which you can geographically diversify your investment portfolio across markets. Well, the good news is that the Indian stock market allows investment in the International Mutual Funds.

So, if you want to diversify your portfolio from your existing Indian Investments to International Investments, then investing in International Mutual Fund is a great investment tool to get started. For the convenience of investors, here is a complete guide that will help you make an informed decision whether or not you should invest in International Mutual Funds.

What is an ‘International Mutual Fund’?

An international mutual fund is a type of investment tool that invests the investors’ money in shares and stocks of international firms. Being on an International platform, investing in this type of mutual fund scheme has a higher risk associated with it. However, the chances of higher returns are also exponentially strong. Why must you invest, you ask? Well, because-

  • They have a higher risk-taking capacity
  • You want to diversify the portfolio geographically and want to seek international exposure for their investments
  • You are looking for higher returns
  • You are looking for long-term investment instruments
  • You are looking for alternative investment options

Thus, in simple words, investment in International Mutual Fund is for investors who already have an existing portfolio in the Indian economy and wish to make informed investment decisions about international exposure.

What are the features of International Mutual Funds?

Investing in mutual funds is a beneficial way of earning higher profits. Investing in international mutual funds offers a great opportunity to diversify your investment portfolio and earn higher returns on your investments. While investing in the best mutual funds in the international market can help you earn higher returns, it might come with its own set of pros and cons. Let us understand in detail the nature of these international mutual funds so that you will know the best mutual funds to invest.

  • Risk: Mutual Funds have risks associated with them and when it comes to investing in international mutual funds, the risk factor increases as the economy of every country is different. And while, every country has its own economic cycle, another important risk factor that you must not forget is the currency exchange rate, as these rates are subject to constant change.
  • Perennial Surveillance: International market needs extra attention as various socio-economic conditions constantly impact the international market, thereby changing the performance of the international mutual funds every time. So, it is very important for the investor to keep a close eye on the various political, economic and social conditions of the country where the investment in the international mutual fund is done.
  • Better results: If you have professional assistance and keep a close eye on your investment, then be assured that your investment in international mutual funds will fetch better results.
  • Tax implications: Investors of International Mutual Funds need to be extra cautious about the tax implications arising within the country and abroad. So, it is suggested by experts to have a careful analysis before investing your hard-earned money in the overseas market.

Thus, the aforementioned are the few of the important features of International mutual fund instrument. Let us further understand the benefits of this instrument.

What are the benefits of International Mutual Funds?

Now that we know that the International Stock Market offers immense opportunity in good investment option and higher returns with diversified investments, let us understand all the benefits in detail. This will help you understand the perks of investing in International Mutual Funds and in finding the best mutual funds to invest in International Market.

  • Geographic Diversification: International Mutual Funds are all about diversifying your investment globally and giving international exposure to your investments. Geographic diversification of your investment portfolio is advantageous as you can reap benefits from the economic cycle of different countries. Also, every country has a different economic cycle. Hence, it makes it easier for the investor to sail through and reap higher returns by investing in different countries.
  • Makes the investment portfolio cost effective: Indian Mutual Funds are not cheap, so by investing in International Mutual Funds, you can balance-out your investment portfolio. Also, with the international exposure and foreign currency, you can make your international mutual fund investment a blockbuster way to achieve bigger financial dreams.
  • Portfolio Diversification: The first rule of investing in mutual funds or stock market is to keep your investments diversified. Diversification of the portfolio reduces the risk associated with market fluctuation. Also, investment in international mutual funds will help you overcome the losses when the market position is low in your own country.
  • Expert Management: Another important reason to avail expert services is that you might not be fully aware of international investment rules and laws. Hence, while investing in international mutual funds seek professional assistance.

Now that we have seen the features and benefits offered by the international mutual funds, let us create a list of most important things that every investor must keep in mind while investing in International Mutual Funds.

  • Investing in Mutual Funds of the international market is similar to investing in the Indian market. So, it is best to stick to the basics of mutual fund investing.
  • Investing in overseas market is not easy as it requires a lot of research and market analysis. So, ensure you carry out extensive research.
  • Before investing in the international mutual fund, it is best to read all the terms and conditions carefully.
  • Understand the details of international mutual funds like its investment objective and the risk associated with the investment.
  • Align your personal investment strategy with the investment objective and economic cycle of the international mutual funds.

Thus, a lot of research and analysis will help you in zeroing in the best mutual funds to invest in the overseas market. But before investing in international mutual funds, it is very important to be specific about your investment strategy and clear about your investment goals. Investment in international mutual fund might be risky. Therefore, it is advised to do through research of the region and the commodity you are investing in. Lastly, even though investing in the international mutual fund is risk prone, it is one of the best ways to earn higher returns, diversifying your domestic portfolio and supplement your domestic income by giving it international exposure.

Recommended Read: Best Mutual Funds for a young investor

Jagrity Sharma
Written by Jagrity Sharma
A bibliophile who hates alliterations, but loves cream, comics and content immensely! On another note, a content marketer who leverages the power of words to explain...almost anything!