Global vs International Funds: Comparative analysis

We do see these 2 terms as the same meaning the same thing, but in the link with investing in a mutual fund, they have diverse meanings. Global vs International Funds have a basic difference in their investment goals and give investors with various kinds of investing chances. It is up to the investor to conduct due persistence and understand the types of investments all of these types of mutual funds will include. Before understanding the major difference let us understand their meaning.

Meaning of International Mutual Funds and Global Mutual Funds

Global vs international mutual funds

 International Mutual Funds

An international mutual fund invests in firms in countries other than the ones they live.  They are also known overseas or foreign funds. Spending in them may mean more risk disclosure, but also outcomes of higher returns. People normally favour it as an option and long-term investment.

With people becoming more aware of investment options around the world, the demand for portfolio diversification is higher than ever. A different plan not only expanded the risks but also hit gaining potential of various markets. The fund houses are growing up with unique schemes over market types, sectors and risk classes, with more experimental investors joining the marketplace.

Global Mutual Funds

Global funds consist of securities in all parts of the world, involving the country in which you live. They are picked essentially by investors who wish to diversify towards country-specific risk without eliminating their own country. Such investors may already have a lower than the wanted concentration of domestic investments. Also may not need to take on the huge level of sovereign risk held in making foreign investments.
The mix of domestic and foreign investments serves in your favour if the global market is performing strongly.

 Table of comparison – Global vs International Funds

BasisGlobal FundsInternational Funds
Terms of investmentsA Global Fund will invest in every available market, also including the investor’s own country.An International fund just invests in foreign markets. They do not invest in the home marketplace.
ReturnsThe returns vary because of various parameters like currency exchange.By profiting on various economies together, your portfolio can generate higher returns.
Tax- efficiencyShort-term gains lesser than 3 years are taxed and Long-term gains are taxed 10 per cent without indexation.After the indexation, the profit is taxed at 20 per cent.
Risk factorThe risk depends on country-specific strategies and market requirements.Currency exchange rates go through highs and lows all the time. For example, if the rupee increases, then you receive lesser rupees per dollar and the NAV drops.
DiversificationThese funds invest in various securities in many countries and in their own living country as well. Thus producing a wide display of investment instruments at one’s control.These funds invest in various international securities in many countries, thus producing a wide display of investment instruments at one’s control.
Investment ObjectiveThe main investment objective is to diversify one’s investment portfolio in all parts of the world, including the country in which you live.The main investment objective is to diversify one’s investment portfolio in all parts of the world but not in the country in which you live.

Points of differentiation- Global vs International Funds

Some of the different features of the International Mutual Fund and Global Mutual Fund are :

  • Risk Factor in global vs international funds

 In international funds, the currency exchange prices go over ups and down every time. For instance, in a US-centric international fund if the rupee declines upon the dollar, then you get added rupees per dollar invested. In this case, the NAV fires up. On the other hand, if the rupee increases, then you get lesser rupees per dollar and the NAV declines. The other country’s prevailing market fluctuation and the sectorial market can change the fund performance. Hence, it requires a lot of analysis and plans to make a well-read option.

In global funds when you invest in foreign markets, the risk relies on country-specific procedures and market provisions. Investing in steady markets decreases the risk part.

  • The taxation system of global vs international funds

In global funds, the short-term gains which are lesser than 3 years are taxed according to the current income-tax slab of the investor. Long-term gains are taxed 10% without indexation and 20% with indexation.
From a taxation view, international funds for a holding time of fewer than 3 years, the investor is supposed to pay short term capital gains tax on the profits at their tax slab. When the fund is kept for more than 3 years, the investor will receive indexation benefit as the profit is used as a long-term capital gain. After the indexation, the profit is taxed at 20%.

  •  Currency factor affects global vs international funds

Variations in the price of an international currency can have a large impact on the performance of a Global Mutual Fund, but since these are not very common circumstances, the risk is not that huge.
The international funds, foreign currency results are gains or losses on international investments due to variations in the relative value of assets titled in a currency other than the main currency with which a company usually leads business. A rising domestic currency determines foreign investments will result in weaker returns when switched back to the domestic currency. The reverse is valid for a falling of the domestic currency.

  • Returns in Global  and International Mutual Fund

Returns given by a Global Mutual Fund can differ, owing to various parameters like currency exchange, global politics etc.
In International mutual funds, by capitalizing on various economies together, your portfolio can get greater returns. Apart from relieving risks by diversifying, overseas investing also increase your portfolio quality.

  •  Diversification of Global  and International Mutual Fund

The central view of investing in a Global Mutual Fund is to diversify one’s investment portfolio. These funds invest in various securities in various countries and their own living country as well, so forming a broad pattern of investment instruments at one’s end.

On the other hand, the in International Mutual Funds they diversify investment portfolios but just other countries This fund invest in many securities different countries but not in their own country.

When to invest in 1 kind of fund rather than the Other

Investing overseas or in foreign markets is hard for everyday investors to do. Many markets are implicitly inaccessible to anything less than institutional money, while options and knowledge of foreign publicly traded companies are restricted. The best way to acquire exposure is by investing in global or international mutual funds.

Investors who need to have a wide global exposure without defining a precise geographic area should hold a global mutual fund. Other than this investor that has a pre-built domestic portfolio may view adding an international mutual fund to their portfolio rather than a global one to expand into foreign markets without overexposing themselves to domestic investments.

Conclusion

Picking up to perform with a global fund provides you with some domestic exposure, whereas international funds do not. If you are already invested in securities in your country, explore the holdings of the global fund you are engaged in to make sure you are not repeating investments. Its all your choice in which fund to invest in but global funds are more responsive in terms of returns.

For mutual fund investments in global funds or international funds allow WealthBucket to assist you. Let us help you out in short-listing and personalizing your investment. We have a variety of services Equity Mutual FundDebt mutual fund, Large Cap mutual fund or Multi-Cap mutual fund.

Do call us at +91 8750005655. Or you can mail at [email protected]

Related Articles:

Understanding fund of funds, who should invest

Advantages and disadvantages of mutual funds

NFO | New Fund Offer of Mutual Funds | All Pros and Cons

By |2019-09-17T05:22:57+00:00September 3rd, 2019|mutual funds|0 Comments

About the Author:

This article has been posted by Pulkit Jain - the founder of WealthBucket - To raise awareness about Mutual Funds Investments. WealthBucket has made investing in Mutual Funds an easy, quick and welcome process, in India. An interactive online platform providing Trustworthy and sincere services to all its clients.