Through the large cap, mid cap, multi-cap, small-cap, and other equity mutual funds that are available to you, you can invest in domestic companies. Similarly, investors have International Mutual Funds as a choice if they want to invest in companies not listed in India.
According to SEBI’s clarification, mutual funds can use the additional headroom in the overseas investment cap made possible by foreign security redemptions and ensuing sales after February 1, 2022.
How do International Mutual Funds work?
The same rules apply to investing in international mutual funds as in any other equity mutual fund. Investors receive units of the funds after the money is invested in rupees. The money is given to the fund manager, who uses it to buy equities in businesses listed on exchanges outside India.
Advantages of Investing in International Funds
Currency Diversification
We can only observe a downward trend if we examine the rupee’s value about the dollar throughout the most recent period. When compared to today, the Indian rupee is worth Rs. 75, up from Rs. 45 in 2000. Various causes for this depreciation include inadequate fiscal policies, rising inflation rates, and political unrest. You can take advantage of the rupee’s decline by investing in international funds. Investing in rupees can gain exposure to foreign currencies when you invest in international funds.
Global Market Leaders
You may hold shares in some of the biggest companies in the world, including Facebook, Adidas, and Apple, by investing in foreign funds. You may own your favourite companies while also buying their products. As a result, when you invest in these businesses through global funds, you share in their earnings.
Geo Diversification
Investing in international funds has various benefits. The largest benefit of international funds, though, is diversity. In a specific time frame, different economies perform differently. While the US, UK, Chinese, or Japanese economies may occasionally grow, the Indian economy may sometimes be in trouble. Therefore, while the Indian economy cannot produce good returns for you, international funds assist you in leveraging the prospects in these areas. As a result, global diversification can be achieved by distributing your investments throughout different geographies.
Why invest in the form of SIPs?
An easy-to-use mechanism that enables mutual fund schemes investment is a SIP. Your regular and consistent investments can eventually help you create a sizable and secure portfolio, just like countless tiny droplets of water combine to become an ocean.
For instance, your SIP investment’s future worth may be Rs 11.5 lakhs if you start investing Rs 5000 per month for ten years at a 12 per cent predicted return rate!
Therefore, you can use SIP to grow your savings significantly over time, regardless of how small they may be right now.
SIPs can be the best option for you because:
- You can start investing with as little as Rs 100.
- You may develop investing discipline as a result.
- You might be unable to time the market as a result.
- You can gradually build up a sizable corpus with its assistance.
- Utilizing the market’s highs and lows might help you deal with market volatility.
- Through rupee cost averaging, it can reduce your overall risk.
- Your returns may be susceptible to the power of compounding, with the possibility of considerable growth.
- It’s a regular investment habit that makes sure you don’t give in to your emotions and succumb to the panic of short-term economic uncertainty.
Final Thoughts
Although stock investments are their underlying value, there is a slight peculiarity in how overseas mutual funds are taxed. It makes sense to presume that they will be taxed similarly to all other equity mutual funds in India. The first step in reaching your financial goal can be picking the SIP approach, just as a journey of a thousand miles begins with a single step.
Since you don’t have to pay the entire amount at once, choosing a SIP is economical. Additionally, it can assist in developing a disciplined habit and navigating market volatility. A SIP can be started at any time.
