A lot of companies that show incredible growth are listed on the foreign stock exchanges. But to invest in their stocks directly can be a bit difficult. Plus, they may not end up being beneficial as there might be different transactional fees when buying or selling. For instance, the brokerage fee for the same could be in a foreign currency. That amount might be small for them, but after conversion, it could turn out to be huge for you. Hence, often, the best way to go about investing in a foreign stock is by investing in an international fund. But what should be your strategy here? Should you invest in a lump sum or through SIPs? Let us learn about international mutual funds and explore the answer.
What are international mutual funds?
International mutual funds invest primarily in equities and other securities that are not from India. They work similarly to a traditional mutual fund where the fund manager pools money from different investors. There will also be a portfolio that is in accordance with the theme of the fund.
You have plenty of options to choose from when investing in international mutual funds. Below are the common types of international mutual funds.
Types of international mutual funds
Thematic funds – Just like a domestic thematic fund, an international thematic fund focuses on equities related to a particular sector. For instance, a thematic fund that focuses on technology would invest majorly in equities of companies related to IT and other technology. Investing in international thematic funds helps you take advantage of the growth of a particular sector that is growing international.
Region or country-specific funds – These funds mostly invest in securities from a particular country or region and help you take advantage of the growth in that region. For instance, the U.S. has been one of the leaders when it comes to growth. By investing in a fund that focuses on investing in equities from the U.S, you can make the best of the growth opportunities.
Global markets – Global markets funds invest in equities and other securities around the world without a region or sector bar. Hence, these types of funds give the most diversified portfolio. Such a portfolio can help you mitigate the risk while giving you the best growth potential as well.
Ways to invest in an international mutual fund
There are two main ways you can invest in an international mutual. You can either invest in lumpsum or through an SIP. The choice here should be based on the money you have to invest and your investment goals.
If you are trying to build a corpus and do not have a large sum to start investing with, an SIP, where you can invest a small amount of money every month to slowly yet steadily build an investment corpus, would work the best.
At the same time, if your goal is to earn regular returns from a corpus you have or if you are trying to park your corpus for a while, a lump sum investment might work better for you.
Hence, in short, investing a lump sum in an international fund is a valid investment choice as long as you choose a fund that matches your goals.
Investing in international mutual funds has a lot of benefits. To begin with, it gives you a portfolio that is well-diversified. Plus, it lets you take advantage of the growth of markets around the world. Make sure you talk to an investment advisor to ensure you choose a fund that works for you.