international mutual funds: how to choose the right international mutual fund?

1. How to choose the right international mutual fund?

In the world we live in today, it is easy to have access to everything that is international. From phones and food to entertainment and banking, many of us have the luxury of choosing from a range of international options. Likewise, there is also a growing interest in international investment. From this perspective, international mutual funds have played an important role in providing Indian investors with access to overseas investment.

International mutual funds invest in assets such as stocks, bonds, commodities, as well as other funds available in a foreign country. International mutual funds have multiple advantages, some of which include:

  • Diversification
  • Exposure to high growth international opportunities
  • Improve portfolio risk-adjusted returns
  • Hedge against a depreciating rupee

As an Indian investor, you don’t have to worry about picking the right stock on an international stock exchange or worrying about identifying the right international themes and regions. Investing in these funds is as easy as investing in a national mutual fund. However, even though international mutual funds offer multiple benefits and are easy to invest in, you still need to understand how to choose the right international mutual fund.

Key things to check when investing in an international mutual fund

  • Make sure it helps with diversification: You already have an investment portfolio that gives you exposure to certain types of investments and carries a particular level of risk. You need to ensure that the international mutual fund you choose reduces the overall risk of your portfolio and does not lead to concentrated exposure.
  • Have a long-term investment horizon: If you choose to invest in international equity funds, you should ideally have an investment horizon of at least 5-7 years. International investments can face several risks such as geopolitical or currency risk. To ensure that these risks do not have a large impact on your portfolio, it is best to hold these investments for at least 5-7 years.
  • Identify the category that best suits your needs: many types of themes and options are available. For example, you can invest in a US technology fund to benefit from the growth of US technology companies. Or, you can invest in region-specific funds like US stocks or Greater China stocks. However, before investing, you should know and understand the category in terms of potential return and risk.
  • Compare performance: While past performance is never a guarantee of future performance, it can be a good idea to benchmark systems and check who ran them, the consistency of fund management teams, and the reputation of the AMC.
  • Check the expense ratio: Typically, the expense ratio charged by international mutual funds for managing the fund is higher than that charged by domestic mutual funds. Make sure to check the expense ratio before making the investment decision.

International mutual funds are generally best suited for investors who already have investments in mutual funds. A good way to invest in international mutual funds is to use the systematic investment plan (SIP) route which will allow you to invest a fixed amount in the international program of your choice and according to the time intervals that suit you best. The good thing is that you can start an SIP in an international mutual fund with as little as Rs. 500. All you have to do is visit the website of AMC, a mutual fund distributor or one of the many online platforms and buy shares in the framework of your choice.

2. What happens if I miss my SIP?

If you’re a mutual fund investor, you’re probably already familiar with Systematic Investment Plans (SIPs). For those who don’t know, SIP is a way to invest a fixed amount of money in a mutual fund of your choice and at periodic intervals that suit you best. These intervals can be fortnightly, monthly or even quarterly.

SIPs are a popular mode of investment as they have multiple advantages including capitalization, rupee cost averaging, no market timing, and disciplined investing. SIPs are considered long-term vehicles for wealth creation because they allow you to reduce the impact of large price fluctuations on your investment portfolio and potentially help you build wealth through the power of compounding. and the average cost in rupees. However, just as markets go up and down, we also go through different phases of life. It may happen that you cannot pay for a SIP or that you miss a SIP. What do you do then?

  • First thing, don’t panic. Your investment program won’t be dismantled just because you missed a payment or two.
  • You also don’t have to worry about the money that has already been invested through the SIP. It will continue to stay invested and generate returns.
  • Another thing to know is that if you missed your SIP installment in one month, you will not be asked to pay that installment the following month.
  • The fund house will also not penalize you if your bank does not have enough funds due to which the SIP payment is not made.
  • However, your bank may penalize you for refusing direct debits.

That said, the most important thing to remember is that you can miss a maximum of 3 consecutive SIP payments without any risk of your SIP becoming inactive. If you miss more than 3 consecutive payments, the fund house may choose to make your SIP inactive.

Dolores W. Simon