I travel abroad regularly. I want to invest in some foreign companies as I feel the pinch of rising foreign currency. Please advise on how to invest in funds that invest abroad. Also, which funds invest in Australia, Singapore, Japan and Canada?
The reason you should consider global investments is that by spreading your money among several markets, you achieve what stock market theorists have been propounding for years-diversification and hedging risk by spreading it across a mix of assets and markets.
Currency movement should not be the sole reason to invest abroad. There are four ways to invest in foreign equity.
• investing in geographic focussed funds
• investing in international thematic funds
• investing in global funds
• investing in diversified equity funds that can invest up to 35 per cent of their assets abroad
When looking for funds specifically investing in Australia, Canada, Japan and Singapore, your options will be limited; because most international fund available to Indian investors focus on sectors, themes, global equity or specific countries.
Since you are looking for specific geographical allocation, the only funds that invest in three of the mentioned countries is L&T Global Real Assets fund, with 4.3 per cent allocation to Australia, 6.1 per cent to Japan and 9 per cent to Canada. Being a thematic fund, this fund will invest in companies across the world that provide exposure to commodities, property, industrials, utilities, energy, materials and infrastructure. Notwithstanding, the geographical allocation will change with available opportunities.
Also, the tax implication when investing in international funds i.e. funds with less than 65 per cent domestic equity exposure are taxed as debt funds, which means short term and long term gains tax applies.
Your best option is to invest in domestic equity funds that can invest up to 35 per cent of their assets abroad. This way they get taxed like all equity funds, with no long term capital gains tax.
Some funds to choose from include- Birla Sun Life International Equity Plan B, DSPBR Natural Resources and New Energy Reg, L&T Indo Asia, ICICI Prudential Indo Asia Equity Regular, Reliance Natural Resources Retail, Tata Growing Economies Infrastructure Plan B, Tata Indo Global Infrastructure and Templeton India Equity Income fund.