Should You Consider Investing in US Mutual Funds?
Investing in International Mutual Funds offers Indian investors an opportunity to gain exposure to global markets by investing in companies listed outside India.
Investing in International Mutual Funds offers Indian investors an opportunity to gain exposure to global markets by investing in stocks of companies listed outside India. These funds provide access to some of the world's most innovative corporations, such as Apple, Amazon, and Nike, allowing for global diversification. However, before diving into these investments, it’s essential to understand the benefits, risks, and other factors involved.
International Mutual Funds, often known as global funds or foreign funds, are investment options that pool money from multiple investors to invest in a diversified portfolio of stocks or bonds from companies and governments outside your home country. These funds give you access to international markets and help you benefit from global economic growth.
Benefits of Investing in International Mutual Funds
Geographical Diversification: Investing in international funds allows you to spread your investments across different countries, reducing the risk of being solely dependent on Indian markets. Exposure to mature and stable markets, such as the U.S., can also help balance the volatility often seen in emerging markets like India.
Professional Management: International funds are managed by professional fund managers with expertise in global markets. These managers conduct comprehensive research and evaluation, helping to maximize returns while minimizing risks for investors.
Potential for Higher Returns: With a well-diversified portfolio, international funds allow you to benefit from economic cycles in multiple regions, increasing the likelihood of achieving higher returns over the long term. Investing in stable markets can provide additional balance against the fluctuations of Indian markets.
Risks Associated with International Mutual Funds
Currency Fluctuations: One of the primary risks of international funds is currency fluctuation. Exchange rate changes can impact returns, sometimes offsetting gains or exacerbating losses.
Geopolitical and Economic Risks: Investing internationally exposes your portfolio to risks from political instability, regulatory changes, and economic factors in other countries. Understanding the market dynamics of each country in which a fund invests is crucial.
Market Volatility: Foreign markets may be more or less volatile than domestic ones. For example, investing in emerging markets comes with higher risk than investing in established, stable markets.
Key Considerations Before Investing
Aligning with Financial Goals: International funds are suitable for investors with a long-term horizon and higher risk tolerance. These funds are ideal for achieving goals such as retirement savings or funding education, given their potential for growth over time.
Explore Types of International Funds: There are different types of international funds, including global funds, regional funds, country-specific funds, international commodity funds, and thematic fund and fund of funds. Choose the fund type that aligns best with your investment goals and risk appetite.
Risk Tolerance and Investment Horizon: Due to the unique risks of foreign markets, ensure that international funds fit your overall risk profile. A long-term investment horizon of at least five years is recommended to balance out short-term market fluctuations.
Are International Funds Safe?
While international funds offer significant potential, they are not risk-free. Like any investment, they carry risks such as market volatility, currency fluctuations, and geopolitical challenges. Proper research, clear goals, and a strong understanding of your risk tolerance are essential to making informed investment choices in international markets.
Should You Invest in US Funds Now?
As we are observing a downturn in the Indian markets, while the US markets are showcasing strength, one should consider diversifying their portfolio not only across categories but also from a geographical perspective. The key point here is that the investor should not allocate more than 10 to 15 percent of their total portfolio size towards these international funds.
The rationale behind this investment should not be solely due to the bullishness in the US markets; rather, the focus should be on diversification, meaning geographical diversification. Additionally, one should have a long-term investment say 5 to 10 years perspective instead of being influenced by the current rally for short-term gains.
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International Funds in India (As per AUM)
|
Scheme Name
|
AuM (Cr)
|
Returns in Per cent
|
|
1M
|
3M
|
6M
|
1Y
|
2Y
|
3Y
|
5Y
|
|
Motilal Oswal Nasdaq 100 Fund of Fund
|
5,138.40
|
5.93
|
14.96
|
18.18
|
41.11
|
35.86
|
13.55
|
24.14
|
|
Motilal Oswal S&P 500 Index Fund-Reg(G)
|
3,531.50
|
3.18
|
12.33
|
15.46
|
36.74
|
25.48
|
13.32
|
-
|
|
Franklin India Feeder - U.S. Opportunities Fund
|
3,513.79
|
3.17
|
14.44
|
16.33
|
41.79
|
31.49
|
5.69
|
17.65
|
|
ICICI Pru US Bluechip Equity Fund(G)
|
3,221.40
|
0.50
|
8.36
|
8.70
|
29.69
|
19.91
|
10.92
|
15.68
|
|
Kotak NASDAQ 100 Fund of Fund
|
3,183.90
|
4.32
|
14.15
|
17.22
|
38.09
|
37.21
|
13.61
|
-
|
|
ICICI Pru NASDAQ 100 Index Fund(G)
|
1,642.30
|
4.30
|
14.09
|
17.06
|
36.85
|
35.82
|
13.26
|
-
|
|
Navi US Total Stock Market Fund of Fund
|
939.32
|
3.99
|
13.58
|
16.56
|
38.92
|
25.51
|
-
|
-
|
|
SBI International Access - US Equity FOF
|
924.89
|
1.26
|
9.25
|
11.85
|
38.27
|
25.08
|
11.96
|
-
|
|
DSP US Flexible Equity Fund of Fund
|
852.79
|
1.91
|
8.93
|
7.09
|
26.90
|
19.04
|
10.61
|
16.18
|
|
Nippon India US Equity Opp Fund(G)
|
679.10
|
4.86
|
12.74
|
10.76
|
31.59
|
26.46
|
8.71
|
15.31
|
|
Invesco EQQQ Nasdaq -100 ETF Fund of Fund
|
405.61
|
4.16
|
14.10
|
17.18
|
38.23
|
36.69
|
-
|
-
|
|
Aditya Birla Sun Life NASDAQ 100 FOF
|
387.97
|
4.24
|
14.10
|
17.12
|
37.89
|
36.59
|
13.57
|
-
|
|
Bandhan US Equity Fund of Fund
|
322.10
|
5.32
|
14.95
|
16.83
|
45.11
|
32.91
|
13.53
|
-
|
|
Axis NASDAQ 100 Fund of Fund
|
168.93
|
4.24
|
13.87
|
17.01
|
37.43
|
35.86
|
-
|
-
|
|
Edelweiss US Value Equity Offshore Fund
|
121.56
|
4.11
|
12.35
|
11.84
|
32.39
|
14.70
|
11.07
|
13.82
|
Conclusion
International mutual funds provide Indian investors with the opportunity to diversify globally and potentially achieve substantial long-term returns. By carefully assessing the risks, aligning with your financial goals, and selecting the right type of fund, you can leverage international funds to strengthen your portfolio and achieve global exposure.
Disclaimer: The article is for informational purposes only and not investment advice.