International Equity Funds: What are they and how to invest?

Although it is true that equity funds are categorized based on the market cap the choose to invest in, there are other equity funds that are based on a slightly different parameter. These equity funds, also referred to as international equity funds, give Indian retail investors an opportunity to seek capital appreciation by benefiting from the international market cycles. An international equity fund may either invest in international stocks or invest in a foreign equity fund that invests in international stocks. Here’s everything that you need to know about international equity funds –

What are international equity funds?

As mentioned earlier, international equity funds invest in those international companies that aren’t listed on either of the exchanges here in India. These funds invest in companies like Apple, Microsoft, Facebook, Google etc. and try to benefit from the growth and progress these industry giants are making year after year. International equity funds make an ideal investment option for those who wish to invest in foreign markets but do not have the resources to do so. Most of us use apps and services made available by these foreign companies. Since we are giving business to these companies, why not invest in them and try to make profit? Over the past few years, equity mutual funds have gained interest among Indian investors because of their unique and exciting asset allocation strategy.

How do international equity funds work?

There are multiple ways as to which an international equity fund may function. One structure of international equity funds is FOF, where the fund manager of an Indian mutual fund invests in an international equity fund. Here, the Indian fund manager doesn’t buy or sell international securities but buys units of its underlying international equity fund. The fund manager of the international equity fund in which the domestic fund has invested does the job of buying and selling securities. Then there very few Asset Management Companies who manage international funds on their own here in India.

How to invest in an international funds?

You can either make a onetime lumpsum investment or opt for a Systematic Investment Plan while investing in international equity funds. Yes, retail investors can invest in an international equity fund pretty much like they invest in any other mutual fund scheme. A onetime lumpsum investment can be considered by those individuals who have recently inherited a large amount of money or have surplus capital which is sitting idle in their savings account. Keeping a large capital in your savings account doesn’t make much sense as you aren’t going to get any decent returns from your bank. Instead, you can let the money do that hard work and earn some interest for you by making a lumpsum investment in an international equity fund of your choice. The only catch is that you end up exposing all your finances to market vagaries.

A Systematic Investment Plan (SIP) on the other hand is an investment tool made available by market regulator SEBI to allow retail investors to invest small fixed amounts at regular intervals. Once you start a SIP, every month on a fixed date the predetermined SIP sum is debited from the investor’s savings account and electronically transferred to their mutual fund portfolio. Those who are new to investing, they can even refer to online SIP calculator which will help them draw the approximate figure on the capital gains that they might receive at the end of their SIP investing journey.