Global exposure in Portfolio

Global exposure in Portfoliohttps://themoneyvalue.com/global-mutual-funds/No doubt Indian economy doing very good. We are one of the emerging economies with a growth rate of 6%-7%. Ignore the short-term slow down due to Demonetization. In fact, GST is a game changer will see the power of one nation one tax in coming years.When I saw the data of foreign institutional Investor(FII) & Domestic Institutional Investors (DII). The first question came into mind if they (FII)  are investing in India what about us. I mean should I invest in the global mutual fund.The answer depends on your risk attitude. My first choice is always a domestic market.

Because i know about my country, i know how we are developing, whats going on with neighbouring states etc. But how beautiful domestic market is one should keep some exposure in the global market. There is direct as well as indirect root. Direct you can invest in shares, via a broker who supports international markets. Indirect means is via mutual funds. Let's talk about global mutual funds. This is a little advance article if you want to learn basics of mutual funds click here.

What is mean by Global Fund


A global mutual fund, who focus on the international market say US Nasdax Focus. In other word such fund hold shares in the international market

Why hold Global funds


Besides reducing risk through diversification, global investing can also boost your portfolio returns. With no country managing to be at the top of the charts each year, the case for spreading your investments across countries definitely gets stronger.

Types of Global Funds


I) Direct Rute- You have to select international fund & invest in their local currency.

II) Feeder route-  Theses allow us to invest in home currency, where fund collectively invest in global funds.

III) Funds of funds- Theses funds hold units in those funds who invest internationally.

Advantages


I) Diversification & Hedging-


It Reduces the risk of the overall portfolio. This help to keep your return maintained. For example, in 2016, when the Indian Equity markets struggled to return 3%, the US markets returned over 13% and some country specific funds even delivered in excess of 20%. Hence diversification into other markets can help reduce portfolio volatility.  Not all economies behave same time.

II) Access to the global market.


Suppose you want to invest in Facebook or Google, but they are not available in Indian market BSE/NSE. So these funds allow us to take the position & get best of them.

Disadvantages 


I) Currency Risk


This involved fluctuation in the foreign currency against INR. The stable currency will give you a better return.For example, if your fund invests in US Nasdaq markets and the rupee depreciated against the dollar. You will get more rupees for every dollar invested in that country and to this extent, your NAV will be higher. However, if the rupee appreciated against the dollar then you get fewer rupees for every dollar invested there and your NAV will take a hit to that extent.

II) Political Environment


More stable political environment more chance for growth & vice versa. More unstable economy more fluctuation in NAV.International Folio allow us to diversification which minimises the risk. While selecting folio one should look for Taxes, GDP, the growth rate of the country.

Recently I read the books called "Common Sense on Mutual Funds By John Bogle" which motivates me to write this article, there are certain books which you must read in the share.Top 10 Must read Books on Share Market.

With this, i will suggest one should keep up to ten percent in international funds. There are funds who focus on China, America, specific regions in the America. My personal choice is US Focus funds. I summarise TOP Five performing US Focus funds. There also theme based fund e.g Infra theme which again finds international opportunities.



I personally don't like any theme based scheme. I prefer to go with multi-cap funds. It is up to you. Past returns can not be the main criteria for selection of funds.  Keep 2-3 more filters in your selection strategy.https://themoneyvalue.com/wp-content/uploads/2017/09/dollar-941246_640.jpg

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