Global Funds: Your ticket to investing in foreign markets

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Mutual Fund

Mutual funds are a pool of professionally managed funds that invest in a diversified portfolio of securities for income generation and long term capital appreciation. Every mutual fund scheme is assigned a fund manager (multiple managers in some situations), who are responsible for executing anasset allocation strategy in such a way that the scheme is able to outperform its underlying index. Every mutual fund scheme strives to help its investors achieve the common investment objective, which in most scenarios is to achieve capital appreciation over the long term. Every mutual fund scheme, depending on its investment objective and asset allocation strategy, may invest across various money market instruments as well as in Indian and foreign economies.

Global funds these days are gaining momentum among equity fund investors primarily because these funds give Indian retail investors an opportunity to invest in global economies. A global fund is an open ended equity scheme that invests in overseas securities and global economies like the USA and other big global players. By investing in a global fund, a mutual fund investor can seek capital appreciation from developed economies with better GDP and economic progress.Investing in global schemes gives investors an excellent opportunity to invest in international markets.

There is a common misconception among several investors who believe that since a global fund invests in international equity markets, it might carry a higher expense ratio. However, as per SEBI guidelines the expense ratio of global funds is capped at a nominal rate. Investors are expected to get in touch with the fund house to understand the expense ratio of the global equity scheme.

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Start a SIP in global fund

Those who wish to inculcate the discipline of regular investing, they can start a monthly SIP in global funds. A Systematic Investment Plan is a method for investing in mutual funds of all types. An investor can start a monthly SIP in global fund and target their life’s long term financial goals like buying their dream home, building a retirement corpus for their yesteryears, planning for their children’s future etc. If you are a KYC compliant individual, you can start a SIP in global schemes from the comfort of your home or office. All you need is a laptop or a smartphone and a decent internet connection, using which you can easily invest in gold funds via SIP. Only a KYC compliant individual can invest in mutual funds, hence it is essential for investors to complete all mandatory pre-investment procedures. Once you decide on the investment amount and allow auto-debit, every month on a fixed date a predetermined amount is debited from the investor’s savings account and electronically transferred to the fund.

Benefit from power of compounding

Those who investing global equity funds via SIP keeping a long term investment horizon, such individuals tend to benefit from the power of compounding. In mutual funds, compounding refers to the interest earned on the interest from the initial investment amount. However, one must not redeem the capital gains the they receive through investing. If you allow reinvestments, only then you can witness the actual power of compounding. Compounding holds the potential to turn your small investment amounts into large corpus, but it is essential for investors to be patient and continue investing till their investment objective is accomplished.

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If you are unaware about how much you need to invest in order to achieve the desired corpus, you can refer to online SIP calculator, a free online tool easily accessible to everyone. If you wish to understand more about global funds and how they can help you with your financial goals, discuss the same with your financial advisor.