I want to invest in global funds. Are there any benefits in doing so?
- Pankaj Jain
There are 26 funds that fall within this category. They have varied investment objectives such as investing in geographies, sectors and commodities. The one big advantage of investing in these funds is the diversification across economies that one gets. However, there are a few disadvantages also. First, there aren’t enough options available so that you may get adequate choice within a certain category (say, China focused funds). Second, if the foreign currency you are invested in depreciates vis-a-vis the Indian rupee, your returns will be hit. Three, any of these funds that do not have at least 65 per cent exposure to Indian stocks would be treated as debt funds for tax purposes. In India, equity funds receive more favourable tax treatment than debt funds. By and large, only knowledgeable individuals with high risk tolerance and ability to stomach losses should invest in these funds.
This article was originally published on January 19, 2011.
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