Learn how to invest in international mutual funds

There was a time when the word ‘international’ invoked a sense of pride and jealousy. Having cousins who lived in foreign countries was a matter of pride since they sent you stuff which was not available in India. However, we have come a long way from those days. Today, most of the products and services that are available in international markets can be accessed here in India. Whether its entertainment, consumer goods, clothes, shoes, etc., pretty much everything is available. As a matter of fact, you consume or use many of these international goods and services on a regular basis. Which is great. But what if you could also invest in them and profit from their growth? Wouldn’t that be even better?

The good news is that today you can easily invest in international companies by simply investing in an international mutual fund offered by any of the domestic Asset Management Companies (AMCs).

Everything you need to know about international mutual funds

International mutual funds are simply domestic mutual funds that invest in foreign markets. They offer a wide choice in terms of giving you an opportunity to invest across geographies like US, China or Europe or different themes like US technology, mining, etc.

If you are wondering how to invest in international mutual funds then be assured that it is a simple and efficient process. As a matter of fact, the best thing is that the investing process is the same as investing in domestic mutual funds. You invest in rupees and receive proportionate units of the international mutual fund. The money that you and other investors invest is then pooled by the mutual fund company and either invested in stocks listed on foreign exchanges or in foreign funds that in turn invest in foreign companies. The best part is that you can also start a Systematic Investment Plan (SIP) in an international mutual fund of your choice. Through an SIP, you can invest a fixed amount of money in the fund at time intervals, like fortnightly, monthly or quarterly, that suit you best.

Now that the what and how of investing in international mutual funds is covered, the next thing to consider is how to choose an international mutual fund to invest in. Again, the answer is simple. Assess your risk profile, return requirements, and investment time period and ensure that your investment in the international mutual funds meets your asset allocation strategy. Also be aware that investing in international mutual funds can have some added elements of risk, so keep that in mind while choosing to invest in international mutual funds.

Pros and cons of investing in international mutual funds

Just like there are two sides to every coin, there are pros and cons to every investment. Some of the pros include:

• Geographical diversification to enhance growth potential: The biggest advantage of investing in international mutual funds is geographical diversification. When you invest in international mutual funds, you ensure that your portfolio is not concentrated in a particular region. This allows you to benefit from the growth potential of other economies.
• Diversification to mitigate risk: International mutual funds will help you better diversify your portfolio and ensure that risks stemming from geopolitical unrest or volatility in your domestic market are mitigated.
• Currency diversification: International mutual funds also expose your portfolio to the movements in international currencies and can protect your portfolio when the rupee falls against international currencies. The depreciating rupee can act in your favour as an appreciation in dollar value will boost your returns.

When it comes to cons, you need to be aware of two things. One, you need to choose your international mutual fund investments carefully as you should avoid investing in funds that further invest in unstable countries that do not have efficiently developed markets. And two, exposure to foreign currencies can sometimes work against you in case the INR appreciates against that currency.

Considering all of the above, remember that investing in international mutual funds can add an edge to your portfolios. However, there are some risks to consider before you take the plunge.

An investor education initiative by Edelweiss Mutual Fund

All Mutual Fund Investors have to go through a onetime KYC process. Investor should deal only with Registered Mutual Fund (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit - https://www.edelweissmf.com/kyc-norms 

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