How are your national investments going? Well – at some point, you would be wanting to explore overseas. It gives you more exposure, and it also lets you get through with your potential. Now, investments in domestic companies are made through equity mutual funds that are available with large-cap, mid-cap, multi-cap, small-cap, and much more. But, when you want to start investing in companies that are not listed in our country, one of the greatest options that are available to you is international mutual funds.
What are International Mutual Funds?
International mutual funds – they are the funds that invest in companies based in other countries. This money is often known as offshore or international funds. Investing in them can expose you to more risk, but it also has the potential for bigger profits. People frequently prefer it as a backup plan and/or long-term investment. With people becoming more aware of financial possibilities all across the world, portfolio diversification is more important than ever.
A varied plan spreads risks while also tapping the profit possibilities of numerous markets. Fund houses are developing innovative schemes across market types, sectors, and risk classes as more risk-taking investors enter the fray. For instance, here are some kinds of mutual funds that you just cannot overlook.
Best Performing Mutual Funds 2022
Here is a list to some of the best international funds in the market today:
Here are the top equity mutual funds today:
- ICICI Prudential US Bluechip Equity Fund.
- IDFC US Equity Fund of Fund.
- Nippon India US Equity Opportunities Fund.
- DSP US Flexible Equity Fund.
- Edelweiss US Technology Equity Fund of Fund.
- PGIM India Global Equity Opportunities Fund (G)
- DSP World Mining Fund.
- Edelweiss Europe Dynamic Equity Offshore Fund.
- Motilal Oswal Nasdaq 100 Fund.
- Edelweiss Greater China Equity OffShore Fund.
This is a list of the Top 10 Hybrid mutual funds:
- ICICI Prudential Multi Asset Fund
- Edelweiss Aggressive Hybrid Fund
- Canara Robeco Equity Hybrid Fund
- Baroda BNP Paribas Aggressive Hybrid Fund
- Quant Absolute Fund
- Quant Multi Asset Fund
- Kotak Multi Asset Allocator FoF – Dynamic
- ICICI Prudential Thematic Advantage Fund (FOF)
- ICICI Prudential Equity & Debt Fund
- Kotak Equity Hybrid Fund
These are the best performing gilt funds out there:
- Edelweiss Government Securities Fund
- ICICI Prudential Gilt Fund
- SBI Magnum Gilt Fund
- DSP Government Securities Fund
- Kotak Gilt Investment Fund
- IDFC GSF Investment Fund
- Axis Gilt Fund
- Nippon India Gilt Securities Fund
- PGIM India Gilt Fund
- UTI Gilt Fund
Debt Mutual Funds
Here are some of the debt mutual funds or fixed income mutual funds in 2022:
- DSP Healthcare Fund – Direct – Growth
- Aditya Birla Sun Life CEF – Global Agri Plan – Growth-Direct Plan
- ICICI Prudential Multicap Fund – Dividend
- ICICI Prudential India Opportunities Fund Direct Plan Growth
- Aditya Birla Sun Life Government Securities Fund Direct Plan Growth Instant Gain
- IDFC Government Securities Fund – Investment Plan – Regular Plan
- Nippon India Gilt Securities Fund – Direct Plan Defined Maturity Date Option
- ICICI Prudential Ultra Short Term Fund – Direct Plan – Daily IDCW Payout
How do International Mutual Funds Work?
Investing in foreign mutual funds is similar to investing in any other type of equity mutual fund. The funds are invested in rupees, and investors receive units of the funds in return. The money is invested in equities of companies listed on exchanges outside of India by the fund manager. The fund manager can now invest her money in international stocks in two ways.
- By purchasing stocks directly and expanding your portfolio – for instance, if you already have growth funds – you can choose some of the best Hybrid Mutual funds and expand.
- Alternatively, you can invest in an established global fund that already has a pre-designed portfolio of international company equities.
Regardless of the route they take, they are managed by Indian mutual fund companies. They, like all other mutual funds, are governed by the Securities and Exchange Board of India (SEBI).
Now, there are different types of Funds; here it is explained to you.
The Varied Kinds of International Funds
There are numerous international funds accessible for investment in India. Each of these funds approaches global investment differently. Based on these principles, we divided international funds into three categories:
a) Country Specific – These funds, as the name implies, invest in the stock markets of a specific region or country. For example, an international fund that only invests in US stock markets or a fund that exclusively invests in Asian markets. The key goal is to capitalize on the chances created by these markets in order to make a profit.
b) Thematic – These are similar to domestic thematic mutual funds in that the fund invests according to a theme-based strategy. A domestic thematic fund with the infrastructure theme, for example, will invest in the equities of cement, power, and steel businesses. An international-themed fund, on the other hand, will invest in the stocks of overseas companies that are relevant to the theme.
c) Global – They are in conflict with regional or national funds. Instead of focusing on a single country or region, these funds invest globally. They have a portfolio of stocks from companies all across the world. This implies they take advantage of opportunities in multiple marketplaces at the same time. The primary goal here is diversification. Even if one of the markets underperforms, investing in other markets will save the investor.
How Will International Funds Benefit You?
There are varied sets of perks associated with international funds – and they are:
Safe Against Currency Risks: Another advantage of international funds is that they act as a hedge against currency risk. Investing in a single currency carries concentration risk because a decline in the value of the home currency can reduce the overall portfolio’s performance. When an investment portfolio contains international securities, however, the difference in the value of two currencies tends to minimize the impact of the home currency’s depreciation.
Diversification with Geography: International funds diversify an investor’s portfolio geographically. Global markets do not perform in lockstep. If an investor’s portfolio consists solely of Indian stocks and bonds, the entire portfolio returns are influenced solely by the performance of the Indian market. Including international funds broadens the portfolio’s geographic diversification and reduces investment risk from a single jurisdiction. By maintaining a portfolio of international stocks, an investor can take advantage of opportunities in various markets and achieve consistent returns, even if the Indian economy suffers a slump.
Access to Global Market Leaders: By investing in international funds, you become a shareholder in some of the world’s largest corporations, including Facebook, Adidas, and Apple. You can be both an owner and a consumer of your favorite brands. As a result, when you invest in these companies through foreign funds, you share in their profits.
How Would They Be Taxed?
This is a question that would have occurred, and since it is new and unlike your domestic investments – you would not be wondering.
Although foreign mutual funds contain equity investments as their underlying asset, they are taxed in an unusual way. It is quite reasonable to expect that they would be taxed in the same manner as all other equity mutual funds in India. However, this isn’t the case. International fund returns will be taxed in the same way that debt fund returns are. A capital gain occurs when you earn from the sale of your investment. The capital gains produced by selling your investment are taxed based on how long you kept your investment under the debt taxation framework. The same is true with international funds:
- Short Term Capital Gains occur when you redeem your overseas fund investment within three years. These profits or earnings are added to your income and taxed based on your tax bracket.
- Furthermore, if you invest for three or more years, your returns are categorized as Long Term Capital Gain (LTCG). After indexation, such gains are taxed at a rate of 20%.
Expanding your portfolio is one of the best things that you would possibly do with your investments. When you go the extra mile, you know you will see more benefits than you initially used to.