Global Mutual Fund Vs International Mutual Fund

Global and international mutual funds involve investments in markets outside India. An investor should be vigilant about the investment goals of these two types of mutual funds. Blindly following the name will only leave the investor with higher risks which can lead to losses. Here’s a clear definition of the two mutual funds.

A global mutual fund comprises investments across the world, including the country where the investor lives. Here, domestic investments as well as foreign investments are spread across various countries, reducing the country-specific risks. This diversified portfolio works best when the world economy is in good health. Even though the market in one country is facing a downfall, the investor can benefit from the favourable market of other countries.

International mutual fund, too, involves investments across various countries. But unlike the global fund, the international fund excludes the country where the investor lives. The diversification increases further as some international funds may eliminate only the home country while some may be region-specific investments such as Asia or Europe.There are international funds that exclude some countries, apart from the home country. An investor can look at international funds offering a tailor-made portfolio that focuses on either developed nations or emerging markets.

According to the Securities and Exchange Board of India (SEBI) mandate, 80% of stocks allocation has to align with the mutual fund name. So, if the investor comes across a mutual fund mentioning ‘Asia ex-India’, it means 80 percent of its stocks are from Asia, excluding India.The name is crucial when purchasing a global mutual fund or an international mutual fund. For example, an Indian investor looking for an international fund should check the fund name to ensure the exclusion of the domestic market. Having said this, the investor should not ignore a thorough perusal of the mutual fund document enlisting the kind of investments and risks involved.

Both global and international funds provide opportunities to diversify the portfolio and gain higher capital appreciation over domestic investments. However, foreign investments are always subject to currency fluctuation risks as well as the accounting regulations varying across countries. Investors need to be alert about some countries giving the government autonomous control over industries.An investor should choose a global fund when he or she is looking to broaden his/her domestic investments as well as to explore opportunities in the worldwide market. However, while purchasing a global fund, the investor has to ensure there’s no duplication of his existing domestic investments.  An international fund is suited for an investor who is having a well-balanced domestic investment portfolio and looking to diversify investments across foreign countries.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.