Given the current situation, if I want to start an SIP in an international fund for diversification with a horizon of eight-ten years or maybe longer, should I be investing in US funds or China funds?
- Santosh Prabhu
In this kind of market or in any market, one should diversify by spreading one's risk across different fund managers and different geographies. That's the reason you invest in a mutual fund. One should invest in an international fund simply because that's a right approach to diversification.
I find that different avenues available to Indian investors for investing in the US market are geographically more diversified as compared to those having exposure to the Chinese markets. In the case of China-based funds, I find them to be more like the international sector or narrowly focused funds.
Indian investors have access to around six-seven US investment avenues, including the Nasdaq 100 ETF. Geographically, these funds are very diversified, as their underlying businesses are globally diversified. But if you are getting attracted to these funds just because they have recently done little better or they are now falling little less than Indian funds, then it may not be a good idea. We are witnessing rupee depreciation, which means that effectively you gave your Rs 74 and now if you take it back, it becomes Rs 77 or 78. This is translating into superior performance for international funds. In other words, even though US funds have fallen, they haven't fallen much for Indian investors, simply because the rupee depreciation has reduced or cushioned the losses. Nevertheless, you can't take it for granted, as this gain can disappear. Thus, such reasons should not be the catalyst or triggers for your thinking.
You should invest simply because you should diversify your portfolio, as it's the core principle of investing and international funds turn out to be superior vehicles of diversification.