Are Global Funds Suitable for Regular SIP Investments?
While investing in SIPs, have you considered diversifying your portfolio beyond India to capture the global growth trajectory? Global mutual funds allow investors in India to explore opportunities beyond domestic markets and participate in international economies.
However, you might be wondering, are global mutual funds suitable for regular SIP investments? If you are looking to diversify and add some global assets to your portfolio, it’s time you considered these global funds.
In this blog, we have comprehensively explained the benefits and risks of these funds for regular SIPs.
Diversification and exposure of global funds
Global funds offer diverse ways to access international markets. They come in the form of global equity funds, regional funds, thematic funds, and international ETFs.
1. Global equity funds
Good global equity funds allocate your assets across different companies from all around the world. Naturally, this opens up a scope for diversification.
2. Regional funds
Do you want to invest in specific economies like China, the US, Europe, or the Middle East that look promising? For this, regional funds can be explored.
3.Thematic funds
As the name suggests, thematic funds help you stay invested in global trends. Consider putting your funds in companies that lead innovation in fields like clean energy or AI.
4. International ETFs
You may already have some exposure to domestic ETFs. With international ETFs, you can track global indices.
This breadth of investment helps investors overcome the concentration of asset categories in the home country and balance their portfolios.
Benefits of regular SIP in global funds
Here’s how investors benefit from the best mutual funds for SIP.
1. Averaging of the rupee cost
Over the long term, the average buying price of your units comes down when you purchase in dips. With an SIP in global funds, you can buy fewer units when prices rise. This strategy helps in averaging the rupee costs in volatile global markets.
2. Currency diversification
With international investments comes currency diversification. It acts as a hedge against the depreciation of the rupee. So, when the rupee weakens against the dollar or any major currency, the overseas component of your portfolio can gain in terms of INR, which offsets domestic losses.
3. Access to leading global sectors
In Indian markets, many global market leaders in cloud computing, AI, semiconductors, biotech, and luxury aren’t represented fully. When you create an SIP in global funds, you steadily build exposure to these sectors.
4. Participation in high-growth economies and thematic trends
With global funds, you gain access to high-growth economies like the US, Japan, and South Korea. Therefore, you get the opportunity to capitalise on thematic trends. Compared to traditional markets, these sectors can deliver superior returns over time.
Risks and considerations
Like any equity fund, global mutual funds aren’t risk-free, either.
Fluctuations in exchange rates
The risk of changing exchange rates works both ways. If the rupee depreciates, you get higher returns. The reverse is also possible, as your gains can erode if the rupee appreciates.
Regulatory aspects
Some of the other factors affecting the performance of global mutual funds are international regulations and developments in the geopolitical world.
Conclusion
Typically, global funds are suitable for investors with a horizon of over five years. Your domestic portfolio may already be strong, or you may be looking to add global equity to balance your portfolio. In any case, these funds work when you systematically invest and remain disciplined.
