The investor of the twenty-first century is well-informed and aware of the performance of markets around the globe. For such investors, geographical boundaries no longer seem to be a hindrance for exploring investment opportunities and earning good returns. These investors now turn to Global Funds which allow them an opportunity to further diversify their portfolio and invest globally. Here, we will talk about these funds and the features and benefits offered by them.
Global Mutual Funds invest in companies that are spread around the globe. They allow investors to invest in international markets.
So, are Global Funds and International Funds the same?
No. We understand that the names can be a little confusing but allow us to explain the difference.
If you are living in India, then international is everyplace except India, right? Also, global means all countries including India, right? The same logic applies to global and international mutual funds too.
Here are some salient features of these funds.
Usually, investors opt for these funds to further diversify their investment portfolios. Since global funds invest in a wide range of securities in several countries, the investment is truly diversified and does not carry concentration risk.
When you invest in different countries, the risk will depend on the market conditions and macroeconomic factors of every country. Hence, you must look for steadier markets before investing. Currency risk should also be considered since the change in the value of an international currency can impact the overall performance of global funds.
The returns from these funds can vary since there are several factors governing the performance of these funds.
Investing in Global Mutual Funds is a good way to hedge against inflation.
All mutual funds which invest primarily in foreign markets are considered to be non-equity funds for tax purposes. Hence, global funds are taxed as follows:
Here is a quick look at the different ways in which these mutual funds are structured.
Some global mutual funds invest in securities based on certain themes. For example, you can invest in a global fund that invests in companies from the energy sector around the globe. This can be a great option when you are certain about growth in certain sectors.
Here are the pros and cons of investing in these mutual funds: