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Business » Mutual Funds » International Mutual Funds
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International Mutual Funds |
International mutual funds are those funds that invest in non-domestic securities markets throughout the world.
Investing in international markets provides greater selection diversification and let you capitalize on some of the world's best opportunities.
If investments are chosen vigilantly, international mutual fund may be profitable when some markets are rising and others are declining. However, fund managers need to keep close watch on foreign currencies and world markets as profitable investments in a rising market can lose money if the foreign currency rises against the dollar. In recent years international mutual funds have gained recognition. This can be attributed to removal of trade barriers and expansion of economies, which has sparked off growth in different regions of the world.
Several Things to Consider before Investing in International Mutual Funds
International Investing Formula:
According to a survey, the best policy for investment is to have a 70% domestic investment and a 30% international diversified funds investment. The survey reveals that this investment strategy is better than having a 100% domestic investment portfolio or a 100% international exposure in terms of risk exposure and return on the capital.
Diversification:
Not all the markets of the world move in one pack, so a downswing in a country's market can be well taken care off by gains in the others. So, it is necessary to have diversification in different markets across the world.
Currency Exchange Risk:
You should also factor in foreign exchange currency fluctuations in your investment returns. This means in effect you invested $200. After a year your investment appreciated to Rs 10,000 but at the same time dollar appreciated to Rs. 50. So due to fluctuation in dollar-rupee rate, your investment is still worth $200.
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