Investment in a Mutual fund is subject to market risk and it’s important that you should do thorough research of the market and read the mutual fund documents. There is a foreign mutual fund in India that you can invest in. There are international equity mutual funds in which the money is invested in companies located in other countries of the world like the USA. Your money will be invested in the stock markets. The investment may be risky if you go for international mutual funds but there is a chance of high returns too. All you need to do is select a suitable fund and monitor its progress. You should be ready for long-term investment. Like Indian mutual fund investment, the strategy to invest in the foreign investment mutual fund in India depends on your goal, risk appetite, and the corpus of fund you have at your disposal.
There is an urgent need for portfolio diversification and it’s a wise thought. Your risk is well spread out and you have the earning potential of good returns from international mutual funds. There are many types of international equity mutual funds. Indians today are more aware of investment options in different funds. If you have diversification in mind, you may tap the earnings from various markets including foreign investment mutual fund in India.
Who these funds are for?
These are for smart investors. There are many reasons smart investors invest in these funds. Diversification is one of the reasons. The economic cycle of different countries is different and an investment in them ensures lesser loss and a greater return. You also know that exposure to international markets will broaden your experience. These funds are for those investors who are experienced and who are active. They are having both short-term and long-term goals of investment according to the suitability of their requirement.
These international mutual funds, both equity and debt, give you the opportunity to do the earnings being part of the foreign companies. There are different pros and cons of investing in these funds. There are risks involved due to changes in the currency exchange rate. If the rupee falls against the dollar, you stand to gain more. Your earnings will be in rupees. If the value of the rupee rises, you stand to lose. You need to be vigilant about political, financial, and other aspects of these countries. The performance of the fund will depend on these. You should do good research on your sectoral investments in foreign countries. These sectors are IT, infrastructure, power, and so on. Any fluctuation will affect your investment.
So, these investment funds are for those who are experienced with mutual fund investment and who are willing to know and monitor the foreign financial market.
It is observed that the indices of stocks of different countries move in different directions. The year 2015 was not good for the SENSEX but the foreign markets like the Japanese market closed successfully in 2017. There was a great return of 28 per cent. China gave a much higher return of around 37 per cent. It has been observed by the market observers that the US market doesn’t fall even during the crisis when the economies of other countries are hit badly. The fall in the US market is much less than other markets in the world. You should invest in the funds of the US market so that your investment remains relatively safe compared to that of other countries of the world. When there was a burst of the tech bubble in the year 2000, Sensex was severely hit by 21%. The US market fell only by 6 per cent. During the meltdown of 2008 too, the fall in the US market was much less than that of the Indian market.
If you invest in US-based companies, your investment will have better diversification. Your portfolio is much safer there. When there are challenges in the front of oil prices, global rate increase, withdrawals of FDIs, overseas investment in stocks, it really will help you to convert the challenge into opportunities. You will be earning in rupees that have been hit against the dollar. In any case, the victory is yours. This is the advantage of investing in foreign markets.
You should avoid investing in the emerging markets of China and Japan because these markets are like Indian markets, very volatile. They are easily hit and fall faster than the US market and their fall is sharper and deeper. You should also be mindful of the sectors you are investing in when investing in foreign countries. There are sectors where you should not be investing at all in a particular situation or context. It will do you good to be abreast with the performance of sector-wise industries abroad.
