International mutual funds are perfect for people looking to invest beyond geographical restrictions and explore international markets.
Investing through mutual funds in companies listed in India is easy. But if you want to invest in companies outside India, International mutual funds or overseas or foreign funds can help you do so.
In this post you will learn how International Mutual Funds work, who should invest, its types, tax implications, benefits, and factors to consider before investing in international mutual funds. Read on!
International mutual funds work similar to any other equity mutual fund, i.e., the investing methods are the same and they are regulated by the Securities Exchange Board of India (SEBI). The fund manager collects money in INR and invests in companies listed outside of India in exchange for units of funds that are allocated to the investor. There are two ways in which money is invested in foreign stocks: the fund manager directly purchases stocks to build an investor’s portfolio or they invest in a global fund consisting of stocks of foreign companies.
While all investors can invest in international mutual funds at their own risks, it’s not ideal for everybody. People belonging to at least one category of investors given below can invest in international mutual funds.
*Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing.
While most people get confused between global funds and international funds and use them interchangeably, they’re quite different. Global funds are funds that invest in various securities from across the globe including the investor’s home country. International mutual funds, on the other hand, invest in securities globally, except for the ones in the investor’s home country. Global funds are a superset of international mutual funds but are categorized as a type as well.
These types of international mutual funds follow a theme-based approach to investing. If an international mutual fund has a theme of Telecom Services, for example, it’ll invest internationally in brands like HBO, Warner Bros., etc. The primary focus of such international funds is to gain returns from a successful sector of business.
As evident from the name, these funds invest in regional markets or target a specific country or countries. This helps investors identify regions with potentially good economies and capitalize on the opportunities there.
Since international mutual funds invest majorly in equity and related instruments, you may assume that they would be taxed like all other equity mutual funds in India. However, international mutual funds are not classified as equity funds. They are taxed as debt funds. Under the debt taxation structure, when one gain profits by selling the investment, they make capital gains and these are taxed based on how long an investor held their investment:
Investing in International Markets with Navi is just a few clicks away. Follow these steps to start investing now:
*Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This comprehensive article on international mutual funds, their advantages, risks, and types should have given you a rough idea of whether they’re a good fit for you or not. It is important to bear in mind that investing in foreign funds can give you very high returns or very huge losses. Always remember to diversify and invest only the amount you can afford to lose in one particular fund. Happy investing!
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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