Here’s how you can invest in companies like Starbucks, Airbnb and Google | Mutual Funds Articles

31 OCTOBER, 2021

Having an India-centric portfolio has served thousands of Indian investors well over the past few decades. With several sectors enjoying double-digit percentage growth, the growth of the Indian economy has benefited investors. But now, it is time to expand your horizon overseas. 

Savvy investors manage risk and reduce the volatility of price movements by diversifying across assets. They smartly perceive that market risks affect nearly every holding and diversify among various asset classes. As an investor, you need to find the balance between risk and return to achieve your financial goals without keeping you up at night.

Why include international investments?

It's a changing world, as is evident around you. You use an office software made by iconic companies like Microsoft or Apple. You spend time regularly on Facebook and search for information on Google.  With international investing, you can benefit from the business growth of these companies. In the absence of a diversified exposure to international holdings, you could end up with a gap in your portfolio allocation. International investments offer you potential exposure to—global innovation, revolutionary new technology and trends. By investing in international markets, you get the opportunity of diversifying your portfolio even more and managing your risks better.

Having said that, investing in international markets via actively managed Mutual Funds that analyse the fundamentals of every company in the portfolio can be crucial to your long-term investment. Besides, these Mutual Funds offer inherent diversification benefits thanks to the basket of securities that relieve you from the arduous task of picking individual and expensive stocks. You get a never-before option of building an international portion of your portfolio through a Systematic Investment Plan [SIP], irrespective of its price.

How do these funds add diversification to your portfolio?

Research reveals how adding international stocks can cut down market volatility and protect you from risks specific to a region. 

As with any investment, it is wise to ensure you're allocating a suitable amount of your portfolio to international investments for your investment timeframe and willingness to take risks.  However, be mindful that we at Kotak recommend investing up to 20% of one’s portfolio in international equities based on the risk profiling of the clients. Further, it is preferable to invest in globally diversified funds rather than a single country focused funds.

How to invest internationally?

An easy way of adding international companies to your portfolio is to invest in international Mutual Funds that invest in securities of foreign markets.

Currently recommended globally diversified international funds at Kotak include:

Scheme Name Min SIP Amount (INR) Launch Date 1 Year 2 years 3 years 5 years
Franklin India Feeder - Franklin U.S. Opportunities Fund 500 06-Feb-2012 37.07 37.76 27.56 24.87
Invesco Global Consumer Trends^
(Invesco India - Invesco Global Consumer Trends FoF)
500 09-Aug-1999* 27.99 34.44 24.23 23.91
Wellington Global Innovation Fund^
(Kotak Global Innovation Fund of Fund)
100 16-Feb-2017* 34.17 39.89 29.04 NA

Source: MFI Explorer | Data as on 31st October, 2021 | ^Underlying fund returns are calculated by converting USD to INR using RBI reference rates | *Underlying fund’s launch date

The above-mentioned Mutual Fund schemes invest in leading global innovators such as Alphabet, Facebook, Amazon, Walt Disney, VISA, AstraZeneca, Netflix, Starbucks, Visa, Airbnb, Nike and several others.

Summary

  • Investing in international funds improves your diversification, thus minimising any region specific risks.
  • Advanced and emerging international markets have varied level of risks and potential returns.
  • Investing internationally through Mutual Funds gives you the benefit of diversification, is more cost-effective and accessible, without worrying about market timing or trading on international exchanges.
  • We at Kotak recommend investing up to 20% of one’s equity portfolio in international Mutual Funds based on the risk profiling of the clients.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.