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The author is a practising chartered accountant and an independent director on many large public companies whose views and ideas have been instrumental in framing policyMore From The Author >>
How To Invest In International Mutual Funds And How To Choose A Fund
Investors intending to invest in foreign stocks can go through domestic mutual funds who have schemes mandated to invest in foreign stocks
Photo Credit : Canva
Investment in international mutual fund is getting more popular as it is generally believed that all global stocks will not fall together in normal circumstances. Investments in global stocks can be made through direct investments, ETFs, global mutual funds and fund of funds.
This category is quite popular as investing in global mutual funds, the investors hedge their risk by investing in domestic as well as global stocks. International mutual funds invest in various countries and stocks including domestic stocks. Domestic fund houses also provide access to investment in global companies under various schemes floated specifically for such investments. All the major fund houses in India provide window for global investments under various schemes. The schemes are well defined and the characteristics of the product offering are defined in the key information memorandum which is approved by SEBI.
The process of investment in domestic mutual funds is established and hassle free. Investors intending to invest in foreign stocks can go through domestic mutual funds who have schemes mandated to invest in foreign stocks. PGIM India global equity opportunities fund, Nippon India US opportunity fund ICICI Prudential US blue-chip, DSP US flexible equity fund, Aditya Birla life GLOBAL emerging fund are some of the prominent mutual funds who have created a platform for investment overseas.
Investor’s interest in international mutual fund is reflected by the fact that in the year 20-21 overseas investment increased by 300% amounting to INR 12400 crores as assets under management folios also jumped steeply to 6.97 lacs. Retail & HNI have invested heavily over the years.
The process of investment is simple and similar to investment in domestic mutual funds. Technology has been the catalyst which has enabled investors to invest in a faster hassle free environment. In the year of pandemic and lockdown Mutual’s have upgraded the platforms so that there is no disruption.
The investment can be made in Indian Rupees and redemption is in Indian rupees. Investing in overseas Mutual Fund which is non-domestic has its own challenges in terms of methodology of payment, foreign exchange fluctuation and taxation. The most preferred investment vehicle is through domestic fund houses as data and performance is readily available. Investors who have strong domestic presence the most efficient mechanism is to invest through domestic fund houses who in turn invest through various schemes in foreign stocks. The pattern of investment in international mutual fund is different from that of investments in domestic mutual funds.
An aspect which needs to be factored in this is that it is always better to invest medium or long-term perspective as one foreign stocks give a good return over a period of time. Short-term investment in international mutual funds have witnessed volatility and thus should be avoided. Non resident Indians have the liberty of investment from the country of residency. International mutual funds have delivered return of 27% in the the last year. The three-year return is around 12% and the five-year return is approximately 13%. Investors still have the option to choose country specific investment through domestic fund house. There are specific schemes for investments predominantly in the US based stocks. Today the investor is equipped with data wherein fund performance is available along with NAV and returns.
Ease of investing, technology upgrades and low fixed deposit rates have encouraged investors to invest through international mutual funds. The tendency of investors is also to mitigate risks by diversifying their portfolio across global markets and stocks. This is just a beginning as investors would certainly opt for such options as more domestic fund houses launch vehicles to invest allowing them liberty to choose schemes based on performance.
The author is Former Chairman of Bombay Stock Exchange and Founder of Ravi Rajan & Co.