There has been a lot of discussion of International Funds for some time. The reason for this is the increasing interest of investors in these funds. However, investors still do not know very much about such funds. What does International Fund mean? What is the benefit of investing in these funds? Should you invest in this fund? Let’s try to find the answer to these questions.
Why should you invest in an international fund?
Diversification of the portfolio of equity mutual funds is necessary to reduce the risk. Diversification means investing in different types of funds. Many times the performance of the Indian economy is not good, while the performance of the foreign market is good. Many markets of the world do not have much relation with India. In such a situation, investment in international funds helps in diversification. This reduces your risk.
What are the options for investors to invest in International Funds?
Today there are many options for international funds for Indian investors. These are based on country, region, theme and technology. An Indian investor can invest in these international funds in rupees. You can invest online or offline by choosing an international fund like a normal mutual fund.
How do international funds invest in foreign shares?
International funds present in the Indian market invest directly in the shares of foreign companies or in other funds abroad. Investing in other funds is called feeder route. It is like a fund of funds in a way.
How is the tax on the returns of international funds taxed?
In terms of tax, international funds enjoy the same status as debt mutual funds. An investor has to pay short-term capital gains tax on its profits if the fund is maintained for less than three years. The tax rate is according to the tax slab of the investor. Investors get the benefit of indexation if they keep investing in the fund for more than three years. The reason for this is that it is considered to be a long-term capital gain. The tax rate after indexation is 20 percent.
Is there a lot of risk in investing in international funds?
Apart from the risk associated with investing in stocks, investing in such funds also involves the risk of currency. Weakness and strength in the rupee has an effect on your returns against the currency of another country. An investor in India invests in Rs. But, a mutual fund company has to invest in an international fund in the currency of the country where the fund is from. Therefore, before investing in an international fund, you have to be prepared for the risk of currency fluctuations.
