Today many of you look for geographical and currency diversification of your investments. International funds in India allow you to invest in fund houses and companies worldwide. While they can have a high-risk exposure, these funds hold the potential to generate higher returns. Eager to diversify your portfolio? Let’s dig deep into what international funds are, their benefits, types, and taxation rules.
What are international funds?
International funds are those funds that invest in foreign companies. Investing in a global fund is the same as investing in any equity fund in India. While supporting, currency stays in the Indian rupee denomination. Here, the fund manager is responsible for investing her money in companies’ stocks listed on exchanges outside the Indian territory.
What are the important benefits of investing in international funds?
One of the important positive benefits of international funds is their potential to diversify geographically. The economic market fluctuates and shifts its potential in several instances. Here, it means even if the economy of India struggles in certain cases, other countries’ economies, like the UK, the US, China, Japan, etc., may still boom. Thus, finding a prudent international fund per your risk appetite will allow you to avoid any investment losses if the Indian economy generates losses.
This is a crucial benefit. You are allowed to redeem your investments in international funds anytime. Once you sell your funds, you can receive an amount equivalent to your investment when the market closes.
All the details linked with your account statements, the tax status of capital gains, dividends from funds, etc., are sent to you through emails when you invest in such funds. This helps you keep track of and monitor your activities with zero hassles.
International market ownership
International funds allow you to actualize your dream of owning investments in an overseas market. You can buy stocks from recognized global companies like Apple, Face, book, Adidas, etc.
What are the different kinds of international mutual funds?
International funds work on a similar base principle as domestic funds. Thus, their variants are identical. Broadly, there are three major kinds of international mutual funds –
Region or country-specific funds
Such international funds concentrate on a specific country or region, for example, the US, and invest your corpus in companies’ shares listed on the selected country’s indexes. The idea behind such international funds is to make the most out of the potential offered by such diverse geographic locations.
Thematic international funds
Such funds select a particular sector or theme, for example, technology, and invest in the global companies that belong to this sector. Such investments assist you in participating in international sectoral growth.
Such international mutual funds avoid concentrating on a particular country or region. They park your corpus in the portfolio containing stocks of global companies across the sectors. This assists you in capitalizing on opportunities in distinct countries and earning higher returns.
What are the taxation rules of international mutual funds?
While international funds offer access to overseas equities, they are taxed as fixed-income or domestic debts. Investments below three years are termed short-term, while those over this period are called long-term. Long-term capital gains (LTCG) incur a tax rate of 20 percent after indexation,, while short-term capital gains (STCG) on such investments get taxed according to your income tax slab.
Now that you know what an international mutual fund is, it would be prudent to conclude that investment portfolio diversification is an important requirement for many of you. Here’s where international funds can help. They permit you to invest in the overseas market worldwide, gain solid returns, and have broad exposure in fund management.