Some years ago, international or global funds were a craze. Many investors were enticed by these funds. This is because they could invest in international companies at a nominal sum. There was no need to get permission from RBI to invest abroad. They did not have to encounter the trouble of foreign currency conversion since the fund house dealt with all these formalities.
However it was seen that all these funds had underperformed Indian mutual funds. In fact, in many cases, investors have lost their money. Why did this happen? Why could these funds not deliver?
Well, here are few of the of the reasons for the failure of the intenrational funds.
- As intenrational funds invest their entire corpus abroad, impact of economic crisis in the country in which they have invested, will lead to fall in the value of the investment.
- Foreign currency exchange will impact the value of the investment. If the foreign currency is stronger than Indian rupee, the worth of your investment will go up and vice versa.
- Taxation varies from country to country. Taxes will impact the value of your investment and will eat into your returns. Besides you’ll have to pay taxes in India as well, since unlike Indian mutual funds, these funds are liable to be taxed.
So should you invest in international funds or no? Well, as far as possible, stay away from these funds. But if you choose to do so, just invest a small portion (maximum of 5%) in such funds. However do this only once you have built up a healthy portfolio of domestic funds. This will help you withstand the shocks in the international markets.
For help in selecting the suitable mutual funds for investment, you can contact us at questa.mumbai@gmail.com. We offer you unbiased advice on investments, financial planning and hosts of other financial services.
