Finance

Go through the SIP route for international funds rather than rushing

Go through the SIP route for international funds rather than rushing 1
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International funds are a type of equity fund that deals with companies’ stocks listed outside India. Such investments are one of the simplest ways to invest in overseas market as it gives you direct access to global assets. However, investing in such funds may be risky as it is tough to track the movement of the markets owing to several economic and global changes. So, to choose the international mutual fund per your risk appetite, you must consider the listed factors.

SIP route for international funds

·       Track the fund’s record

·       Look for professional and experienced fund managers

·       Go through the cost and expenses mentioned on the fund’s leaflet, brochure, KIM (key information memorandum), etc.

·       Also, ensure the country you select to invest your money in has a tax agreement with India to avoid double taxation.

·       Opt for the SIP route to gain the benefit of compounding, rupee cost averaging, and higher returns over a long period with a smaller investment.

Why is SIP (systematic investment plan) recommended for international fund investments?

SIP allows you to invest a predetermined amount at periodic intervals, say monthly, quarterly, half-yearly, etc., in the mutual fund scheme of your preference and choice. As the amount for SIP is debited automatically from your bank account on a predefined date, it instills financial discipline and the habit of making frequent investments. Moreover, as the requirement for a minimal investment in most equity mutual funds, including international mutual funds, starts from as low as Rs 500, you with a low income can even invest in such funds via SIP and derive the most out owing to the power of compounding.

Automated and periodic investments in SIP even ensure rupee cost averaging by purchasing a higher number of units at a lower NAV (net asset value) in times of falling markets. This assists in averaging out the investment costs and eliminates the need to keep track of market fluctuations. Now that you know why you must buy SIP or opt for this route, read on to understand the crucial benefits of opting for international funds through the SIP route.

Diversification

International mutual fund offer diversification as it invests in distinct global stocks, sectors, and asset classes. Different economies perform differently in a specific period. There might be instances when the economy of India may be struggling, but the UK, the US, and other countries’ economies may be booming. So, international mutual funds assist you in leveraging the opportunity in global markets when India’s economy cannot generate excellent returns for you.

Risk mitigation

Due to diversification, your fund corpus is disseminated across distinct stocks. This event gives the associated risks and gains. Other supplies might pick up when any store in your international fund underperforms. Similarly, if any sector declines, others may balance out the mutual fund portfolio, thus reducing the overall loss incurred.

Wealth creation

As the international fund is a category of equity mutual funds, it has a huge potential to generate high returns than fixed investment options. It can potentially yield inflation-beating returns and returns higher than fixed-income investments that can help you form a huge corpus over a long period.

Additionally, international fund investment through SIP permits you to invest a small investible amount of as little as Rs 500. Thus, you can begin investing early in your career by contributing a meager amount every month to derive maximum benefit from the power of compounding and earn higher returns through smaller investments. For instance, a small monthly investment of only Rs 1,000 through SIP in an international fund at an assumed rate of return of 12 % p.a. for 30 years would yield a return of around Rs 35 lakh. Before buying SIP online, you can easily calculate your returns through SIP in a mutual fund using an online SIP investment plan calculator. Doing so will help you to make an informed decision.

Bottom line

Owing to the advantages linked with international funds and SIP, the investment product and investment route have become very popular amongst many. Such an investment systematically is prudent if you want to go beyond the conventional options like fixed deposits, voluntary provident funds, savings accounts, etc., but still want to benefit from the risk-adjusted returns.

Aly Jones
Twitter evangelist. Web fanatic. Lifelong travel nerd. Passionate zombie scholar. Extreme coffee fan. Amateur entrepreneur. Avid beer lover. Had moderate success lecturing about wieners in the UK. Won several awards for short selling clip-on ties in Hanford, CA. Uniquely-equipped for creating marketing channels for cod in Bethesda, MD. Spent a weekend buying and selling Easter candy in Phoenix, AZ. Was quite successful at analyzing tar in the government sector. Have a strong interest in getting to know barbie dolls for fun and profit.