Global mutual funds are not same as international fundsMany feel global mutual funds are same as that of international funds. However, it’s not so. International funds invest in foreign markets but not in the investor’s home market. On the other hand, global mutual funds invest in assets across the globe, including those in the home nation of the investor.
Features and advantages of investing in a global mutual fundSome of the distinct advantages of investing in a global mutual fund are as follows:
- Diversification This is one of the major advantages of investing in a global mutual fund. Diversification is one of the core tenets of investing and makes your portfolio better shock absorbent. With a global mutual fund, you get to invest in securities of different countries which shores up returns in case an asset class fails to perform as per expectations.
- Gain from currency fluctuations This is another significant advantage of investing in a global mutual fund. When you invest in a global mutual fund, the money is invested in the currency of the country whose securities is held by the fund. In most cases, it’s dollar-denominated assets.
Also, investing in a global mutual fund prevents your portfolio from becoming entirely dependent on the domestic market. When the domestic market is going through tough times, exposure to better performing overseas market can provide your portfolio with the much-needed stability.
While changes in the price of the underlying securities drive the fund’s returns, the movement of dollar-rupee exchange also impacts returns. As the final NAV is arrived by converting dollars assets into the local currency, exchange rate fluctuations play a crucial role. A weak domestic currency actually adds to the returns from the fund.
Apart from these two major advantages, investing in a global fund also hedges you against inflation and help you make meaningful gains in the long run.
Things to keep in mind while investing in global mutual fundsWhile investing in a global mutual fund insulates your portfolio from events back at home, there are certain things which you must keep in mind while investing in them. Note that your investments will be impacted by geopolitical and social events of the country where your funds invest.
Therefore, before investing find out about the events in geographies where your fund invests your money. Invest in the fund only if the events are conducive and will help you gain in the long run. Check the long-term performance of the fund and consult a financial advisor, if required.
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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.
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