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The benefit of living in a truly global economy is that you can diversify your mutual fund investments across geographies. This is where Global mutual funds can be helpful.
Global mutual funds & international mutual funds became available to Indian investors in 2007. But should you invest in global mutual funds in India in 2020? We’ll try to answer this question in this story.
Let’s start by understanding global mutual funds & international mutual funds.
A global mutual fund invests your money in several different countries like USA, Japan, China, and others including India too. These funds may invest in some of the biggest companies in the world like Apple, Amazon, Alibaba, Google, Tesla, etc.
An international mutual fund invests your money in foreign countries like the USA, Japan, China, the UK, and more. These funds may diversify their holdings across multiple high growth international brands like Apple, Tesla, Google, Facebook, etc.
Fun Fact: Did you know that you can invest in Apple, Amazon, Google stocks yourself using Cube? To try, start with as little as $1
The underlying aim of a global mutual fund is to leverage diversification across geographies to deliver long term growth. This strategy can help average out any volatility in the Indian markets with investments in other countries.
However, a global mutual fund carries an above-average risk due to the broad diversification. Speak to a wealth coach if you’re thinking about investing in this type of fund.
The main aim of an international fund is to leverage the potential of international leaders like Facebook, Alibaba, Salesforce, etc. to deliver high long term growth.
Global markets rarely slump at the same time and investing across geographies has benefits of its own. This fund tries to get the best out of these underlying principles.
Since this fund purely invests in international markets, it carries a certain level of risk that you must consider before investing. Speak to a wealth coach to know if this fund may be right for you.
In a nutshell, if a fund invests in every other country around the world except yours, it's an International Fund. On the other hand, if a fund invests in every country across the globe including yours, it's a global fund.
Global funds are classified based on:
Let’s look at this in detail.
A local fund manager handles this fund instead of someone who lives outside the country.
These funds don’t invest your money directly. Instead:
These funds invest in both foreign and domestic funds with a limited allocation of international funds.
You can invest in specific regions based on your judgment. However, it would require an expert level understanding of the region’s economic and geopolitical situation.
If you’re investing in mutual funds with Cube, you’ll get expert advice on when to buy AND sell from our mutual fund advisor, Wealth First.
Watch this video to learn more about how to sell mutual funds
These funds are not region-specific, invest across the globe and are more flexible.
These funds are thematic and invest in specific sectors like energy, mining, gold, etc. However, the non-diverse nature of these funds may increase the risk.
With global & international funds, you’re not just investing in one country. This diversification has benefits and risks.
Global & International funds are treated as non-equity funds during taxation. Things to remember:
1. Marginal tax rate if the global & international fund is sold within 3 years of purchasing.
2. Indexation benefit on gains if the global & international fund is sold after 3 years:
Read this blog on tax-saving mistakes you should avoid in 2021.
Global & International mutual funds can be an addition to your portfolio if you’re looking to diversify across geographies to invest in high growth companies and economies.
However, global & international mutual funds carry risks such as high volatility, geopolitical risks, currency fluctuations, and others. It can be difficult to invest in the right global & international mutual fund based on your goals as well.
So speak to a wealth coach to know more about the right mutual funds that can help you achieve your financial goals. You can even download the Cube Wealth app to know more.
*Note: Facts & figures are as of 16-12-2020. While we update our blogs regularly, download the Cube Wealth app for the latest information on Global mutual funds.
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