Sep 2022
4 mins read

5 Reasons to Consider Global Funds

When it comes to investment, diversification is important. The more diversified your portfolio, the more scope you have to earn healthy returns and mitigate risk. Global mutual fund schemes are one of the most effective ways to diversify your portfolio. Let’s take a look at some of the major benefits of global or international mutual fund schemes for investors:

Portfolio diversification

Since global mutual funds invest in different countries, you can diversify your portfolio across geographies. Moreover, there is additional currency diversification that can help you make the most of currency fluctuations. These global funds come in many varieties. Some invest directly in international stocks, while others do it indirectly by investing in overseas mutual funds. Some funds are country-specific, while others invest in multiple countries.
point 1

Exposure to the global economy

Global mutual funds invest in the capital markets of different economies. As a result, when the world economy grows, your investment has the potential to grow too. For instance, the market capitalisation of the top 100 global companies grew 48% between 31st March 2020 and 2021¹. Since global funds invest in these global companies, they can tap into this growth potential to provide relatively high returns to investors. 
point 2

Hedge against inflation

Global mutual funds are market-linked investments. The growth in the market is linked to the inflationary trend in the economy. Hence, the market growth factors in inflation, which help these funds generate returns with real value.
point 3

Protection from volatility in the domestic market

When you diversify your investment portfolio globally, you reduce your dependence on the performance of the domestic economy. If the domestic economy suffers a downtrend or a recession, your investments do not bear the entire brunt of such a downfall. You can instead tap into the growth in international economies through your investments, generating healthy returns even when the domestic market is volatile.
point 4

Fulfilment of life goals

Global mutual funds are very useful if you have big plans, such as a foreign university education for your child. These funds can potentially generate high returns, helping you accumulate a substantial corpus for your ambitions. Moreover, currency fluctuation are also taken into consideration, which can help you meet high international expenses. 

Global mutual funds can be a very good addition to your portfolio. However, remember that these funds attract debt taxation. This means that if you redeem your investment within 36 months, the returns earned are taxed at your income tax slab rates. If, however, redemption is done after 36 months, the returns are taxed at 20%, and you also get the benefit of indexation.

point 5

For expert guidance on how to benefit from global mutual funds, consult an investment advisor who will explain the scope and advantages of these funds. The advisor will also help you align these funds with your financial goals so that you can make the most of them. 

Source : 1. https://www.pwc.com/gx/en/services/audit-assurance/publications/global-top-100-companies.html

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