Read this blog to know all about global & international mutual funds. Learn how global funds are different from international funds. Use Cube to invest in the best global and international mutual funds.
February 12, 2021
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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.
What Is A Global Mutual Fund?
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.
What Is An International Mutual Fund?
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.
Difference Between Global Mutual Funds And International Mutual Funds
Global Mutual Fund
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.
International Mutual 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.
Types of Global Mutual Funds
Global funds are classified based on:
How they invest
Where they invest
What they invest in
Let’s look at this in detail.
1. How They Invest (Mode of investment)
A local fund manager handles this fund instead of someone who lives outside the country.
These funds don’t invest your money directly. Instead:
Feeder funds: Money collected from local investors is transferred to a parent fund outside the country.
Fund of funds: Invests in other foreign funds.
These funds invest in both foreign and domestic funds with a limited allocation of international funds.
2. Where They Invest (Region)
a. Region only
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
b. Truly global
These funds are not region-specific, invest across the globe and are more flexible.
3. What They Invest In (Sector)
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.
Why Should You Invest in Global & International Mutual Funds?
With global & international funds, you’re not just investing in one country. This diversification has benefits and risks.
Geographically distributed risk
Currency based risk
High growth potential
Profits in foreign currency
Tax On Global & International Mutual Funds
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:
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.
on stock picking, poring over excel sheets, financial news, analyzing market trends, tracking the Sensex, researching company fundamentals, comparing mutual funds, reading financial reports, trying to predict the future & losing your sanity!