1. For young equity MF investors, who are in the process of long-term wealth creation to fulfill identified goals or to build a retirement nest, global investment through Indian MFs is suicidal, when compared with pure domestic mutual funds of all popular categories, viz. Hybrid, ELSS, Multicap and Large-, Mid- and Small-cap funds.
2. Returns of such international funds are susceptible to unpredictable currency risks, as investors subscribe in rupees, but MFs invest in assets that are denoted in foreign currency.
3. Keeping track of a foreign economy's outlook is much more difficult due to lack of precise information and geopolitical risk.
4. Further, a mature market like the US may not be able to beat the returns from emerging markets like India, where economic growth is likely to remain faster, in the long run.
5. One should also bear in mind that although these global funds are equity in nature, their tax treatment still remains non-equity.
6. If investing through feeder funds, you are totally dependent on the parent fund's choices, which may not necessarily suit your own risk profile.
7. The top 5 international funds have always under-performed their domestic counterparts significantly in all terms, viz. short, medium and long, by 5-10% CAGR or even more, which cannot be ignored while creating and accumulating long-term wealth from one's hard-earned limited resources, even for diversification sake.
8. If one is still tempted to invest in them, considering their current performance, a few caveats are noteworthy:-
a) Opt for pure international funds, where asset allocation calculation is easier, instead of mixed offerings with Indian stocks by AMCs to get better tax treatment, in order to avoid investing more to get the same global exposure.
b) Avoid thematic or sectoral global funds that focus on commodities, energy and agriculture exclusively.
c) Invest 10% max., in developed markets (chiefly USA) and emerging global markets, within your risk appetite and overall asset allocation.
d) As these funds are subject to triple volatility risk - equity market, currency swings and geopolitical - invest only through SIPs for rupee cost averaging.
e) Avoid their redemption when Indian markets are performing better in certain periods, and keep their taxation in view too.
2. Returns of such international funds are susceptible to unpredictable currency risks, as investors subscribe in rupees, but MFs invest in assets that are denoted in foreign currency.
3. Keeping track of a foreign economy's outlook is much more difficult due to lack of precise information and geopolitical risk.
4. Further, a mature market like the US may not be able to beat the returns from emerging markets like India, where economic growth is likely to remain faster, in the long run.
5. One should also bear in mind that although these global funds are equity in nature, their tax treatment still remains non-equity.
6. If investing through feeder funds, you are totally dependent on the parent fund's choices, which may not necessarily suit your own risk profile.
7. The top 5 international funds have always under-performed their domestic counterparts significantly in all terms, viz. short, medium and long, by 5-10% CAGR or even more, which cannot be ignored while creating and accumulating long-term wealth from one's hard-earned limited resources, even for diversification sake.
8. If one is still tempted to invest in them, considering their current performance, a few caveats are noteworthy:-
a) Opt for pure international funds, where asset allocation calculation is easier, instead of mixed offerings with Indian stocks by AMCs to get better tax treatment, in order to avoid investing more to get the same global exposure.
b) Avoid thematic or sectoral global funds that focus on commodities, energy and agriculture exclusively.
c) Invest 10% max., in developed markets (chiefly USA) and emerging global markets, within your risk appetite and overall asset allocation.
d) As these funds are subject to triple volatility risk - equity market, currency swings and geopolitical - invest only through SIPs for rupee cost averaging.
e) Avoid their redemption when Indian markets are performing better in certain periods, and keep their taxation in view too.