When it comes to investments, diversification is the name of the game. Global Mutual Funds can be an important tool in your arsenal and can help you make huge profits on investments in the global market. There are many Mutual Fund brands that provide global investment opportunities, and this can also help you beat market fluctuations in your own backyard and still come out on top of the investment game.
So, let’s begin by understanding Global Mutual Funds in depth and learn more about this powerful investment tool.
What are Global Mutual Funds?
As described above, a Global Mutual Fund is an investment tool that allows you to invest in international markets. Simply put, a Global Mutual Fund can be described as a mutual/exchange-traded fund which primarily invests in companies/enterprises which are spread across the world.
Are Global Mutual Funds the same as International Funds?
No! And here is an important distinction that every investor should understand. An International fund only invests in foreign markets and has no investment in the investor’s home market.
A Global Fund, on the other hand, will invest in all available markets; including the investor’s own country.
For instance, if there is a trading company which invests in markets across the Asia and Middle Eastern regions, and still has a certain investment set aside for the Indian market, then it would function exactly like a Global Mutual Fund. If, however, this trading company were to invest in all countries across the globe except for India, we would call it an International Fund.
*A global mutual fund invests in assets around the world including the home country.
**An international mutual fund invests in assets around the world excluding the home country.
Investing in Global Mutual Funds – The Benefits
Global Mutual Funds are great for investors who are looking to diversify their portfolio. Diversification helps in risk management, and by investing in multiple markets you can earn high profits. The time period for investing in Global Mutual Funds is typically more, hence making it a suitable candidate for long-term investments.
Features of Global Mutual Funds
Some of the distinguishing features of Global Mutual Fund are highlighted below:
- Diversification – The main objective of investing in a Global Mutual Fund is to diversify one’s investment portfolio. These funds invest in multiple securities in different countries, thus creating a wide array of investment instruments at one’s disposal
- Risk factor – When you invest in international markets, the risk depends on country-specific policies and market conditions. Investing in stable markets reduces the risk factor
- Currency factor – Fluctuations in the value of an international currency can have a huge impact on the performance of a Global Mutual Fund, but since these are not very frequent occurrences, the risk is not that high
- Hedge – A global fund functions as a hedge against inflation
- Returns – Returns offered by a Global Mutual Fund could vary, owing to multiple parameters like currency exchange, global politics etc
- Term – Most global funds are long-term funds.