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Appropriate funds to get international exposure

The US market probably offers the widest choice of fundamentally strong and globally competitive businesses, tells Ashutosh Gupta

Is it a good idea to invest in funds focused on Europe or should I stick to the US when it comes to international exposure?
- Arun Ramachandran

I prefer the US allocation for the international equity side of the portfolio or even global funds are good for this purpose. But then again, global funds would usually have dominance in the US-listed companies and there are reasons for that.

One is that the US market probably offers the widest choice of fundamentally strong and globally competitive businesses. In fact, you would come across several technology and consumer businesses which are even household names in India but you cannot invest in them in the domestic market. So getting exposure to these fundamentally strong global businesses is one reason why you should stick to the US markets.

The second is on the exchange-rate side because remember when you are investing in the international markets, you are also indirectly assuming the currency risk. And from that standpoint, the US dollar happens to be the ultimate safe haven when it comes to foreign currencies. So even from that standpoint, the US markets make more sense.

But one has to remember that with this kind of international equity allocation, one has to take a more strategic view of things. Because you would come across several compelling arguments and there are expectations that after a sustained bull run in the US markets, on a near-term basis from hereon, the emerging markets may outperform the US markets. But I believe that for
steady-state long-term allocation, there is still a very compelling case to be invested in the US market.

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