❝In­ter­na­tional mu­tual fund can be more risky than nor­mal mu­tual fund❞

Har­shad Chetan­wala, Head - Cus­tomer De­light, Quan­tum AMC Pvt. Ltd.

Dalal Street Investment Journal - - SPECIAL REPORT -

What are in­ter­na­tional mu­tual funds and what is the dif­fer­ence be­tween nor­mal and in­ter­na­tional mu­tual funds?

In in­ter­na­tional mu­tual funds, the fund man­ager in­vests in com­pa­nies out­side India, whereas in a nor­mal mu­tual fund, the in­vest­ment will be done in In­dian com­pa­nies listed in India.

Are in­ter­na­tional mu­tual funds riskier than nor­mal mu­tual funds?

A good mu­tual fund man­ager will al­ways try to re­duce the risk, how­ever, in the case of in­ter­na­tional mu­tual funds, there is ad­di­tional risk of cur­rency fluc­tu­a­tion, eco­nomic and regulatory en­vi­ron­ment. Hence, they can be more risky than a nor­mal mu­tual fund.

In your opin­ion, what would be an ideal time hori­zon for in­vest­ing in in­ter­na­tional mu­tual funds?

Any in­vest­ment in eq­ui­ties, do­mes­tic or in­ter­na­tional, need to have a long-term hori­zon of more than 5-7 years.

Should one look at in­ter­na­tional mu­tual funds for di­ver­si­fi­ca­tion pur­pose or do these funds have po­ten­tial to out­per­form the nor­mal mu­tual funds?

There is a lot of po­ten­tial in India and In­dian com­pa­nies at present and this po­ten­tial would con­tinue for a decade or more. Hence, in­vestors are bet­ter off in­vest­ing in nor­mal mu­tual funds by in­vest­ing in In­dian com­pa­nies. Some HNI In­vestors with higher risk ap­petite may like to look at these kinds of funds from a di­ver­si­fi­ca­tion per­spec­tive.

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