All you need to know about Global Investing
Every equity portfolio has delivered an exemplary return, because of the current bullish trend is with the Indian equity market. And now the new normal with all equity investors is diversifying their portfolio with global exposure. Almost all AMC ( Mutual Fund Companies ) have US Feeder Fund and few with China and European Markets too.
Till some time ago, only HNI’s can invest in US Stocks and global markets, but today the Mutual Funds has made it extremely simple for retail investors too. In the current scenario, the exposure of current global equity market is even lesser than 0.5% of Total Asset Under Management, but this is rising significantly.
Here are certain criteria that every investor should keep in their mind, when they invest in foreign feeder fund.
Focus on Valuation
Investors think that US Tech will give them better returns than Indian Tech Funds because of the tech disruption and global branding. But the returns produced by NIFTY Tech Index is 42% compared to 39% of US Tech Funds. Also the US Tech PE levels are higher than Indian PE Nifty Tech Index.
Being Selective with Markets
Don’t rush and invest your money into all the destinations. US is the first and foremost choice. It is the largest, stable and deepest market. It has good ecosystem, regulation and legitimate too. USD remains the global reserve currency and US market offers the strong systems that can protect the investor interest against malpractices.
China is an emerging economy and delivered good returns in the past and looking promising for the future too. But it is a risky bet given the government controls everything.
UK, German and Japan are other possible destinations, but I will strongly recommend to diversify only after US and China.
When you invest in global Investment funds, the taxation is treated and equal to Fixed Income for tax purposes. Meanwile the long term capital gains can attract tax rate of 20% after indexation benefit.
Should you invest in Global Funds?
Never Bet Against India. Invest only when you completely explored all the categories in Indian Mutual Fund schemes. Indian GDP is growing from 3.2 Tn $ to 5Tn $ by 2025. Indian equity markets all set to extend the long-term average returns from equity markets which is 12%. The best performing Mid, Small and Flexi funds will deliver better returns than the standard bench mark returns.
Never rush into diversification and rush for global participation. Invest only in global schcmes when you sufficiently invested and explored all categories in Indian Mutual Fund Schemes.
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