If you are looking to invest beyond India, opening an SIP after selecting some of the best international mutual funds is a recommended route. But there are a few aspects you need to consider while choosing an international fund. We’d also recommend studying funds provided by top investment firms, such as the best Vanguard ETFs, which provide great ways to diversify internationally.
Identifying the options – The first step would be to look at all the available international funds India has to offer. You will find the thematic and sectoral funds, which are too specific and narrows down your opportunity. To begin with, international investment should be seen as an opportunity to diversify. You will also find emerging markets basket and specific regional funds for countries like Brazil, China, Japan etc. You will also find funds with broad investment themes that invest across all geographies. Lastly, you will find funds that invest in US securities, stocks or funds.
Low correlation to India – Assuming that your already existing investments are in India, your international mutual funds should not correlate to the Indian equities. If both the international investment and your domestic investment move in the same direction, your risk exposure only gets widened. It’s important to look at the correlation coefficient. The lower the correlation, the more independent your international investment will be in relation to the Indian market.
US-specific funds – US and Indian markets generally have a low correlation coefficient. The US dollar also continues to remain strong which enriches your returns further. On the other hand, if you invest in emerging markets you are exposed to the domestic currency risk of those markets, which may not be as strong as the US dollar.
Diversify – The fact that you are investing in an international fund means that you are looking to diversify your investments. Extend the diversification within international funds as well. Geographical and thematic diversification of your international fund investment helps you minimize the risks. The US and European stocks should be complemented with some investment in emerging markets. Thematic funds and sector-based investments can also form a small part of your portfolio.
Look beyond recent returns – This holds true for any investment to some degree. Every country has its unique boom and bust cycle. This may be different from the global trends, and almost certainly different from the Indian economy. Consider the long-term performance of the fund and look for schemes that have been consistent in the long run. Also, find out the current economic and socio-political climate of the country. Make sure that you pick the best international mutual funds which can withstand uncertainties.
You can monitor your mutual funds, as well as manage their insurances and loan needs through online apps like the moneyfy app. Start an SIP through an app now and monitor it regularly to create an investment portfolio that works for you.