Investing in global mutual funds

POSTED BY aniket biswas ON January 16, 2011 7:43 pm COMMENTS (8)

I am 32 yrs old.I have been investing in five top rated equity diversified mutual funds for the
past 3 yrs via sip.Presently since the indian market is not cheap and some other global markets are at a much more attractive valuations,would it be  wise to invest in some
international funds via SIP along with my present SIPs.If so,please suggest some funds.

8 replies on this article “Investing in global mutual funds”

  1. randomguy says:

    Interesting discussion and all in good faith. Here is the chart of USD/INR over last 10 years and focus on late 2008/early 2009 when US market was available for a bargain at below 10 PE (just a guess but wont be far from it) DOW jones 7000 Sensex 8000. Right now US market PE ratio is just below 15 (Indian market >20)DOW 12000/Sensex 20000(not accurate).

    http://www.xe.com/currencycharts/?from=USD&to=INR&view=10Y

    My conclusion is that when the US market was dirt cheap in late 2008-early 2009,the dollar was expensive. Investing in Indian markets turned out to be a much better option.

    Do your sums and try to understand the risk!! Ofcourse the balance changes all the time but keep an eye on the exchange rates when investing overseas!! NRIs know it better.

    There is nothing wrong in investing overseas when you understand the risks involved. Dont do that in the name of diversification-a loosely applied term in my books.

    Cheers

  2. shashank kashettiwar says:

    @Ramesh,
    Is their any study which shows the extent of non-correlation between equity markets of the world today, have you any links to such articles?
    If equity markets in the world are producing so low returns as indicated by randomguy above, in addition to the exchange rate fluctuations which need to be factored in and consequently making the strategy complex, will it be ok to safeguard our equity portfolio through any other mechanism available domestically?
    How do you see this whole issue?

    shashank

    1. Ramesh says:

      Will do a writeup regarding my views on this. 🙂
      Ramesh

  3. Ramesh says:

    @Debashis

    I have gone through the links you have provided. It seems that the articles mean to say that you should not invest in the NFO of global funds.
    I am with you on that. But I would like to extend to almost all NFO, whether global or local.

    It is well and good when the emerging markets perform well above the developed markets because of one reason or the other (which they have been doing since the last few years), but international diversification helps you when the opposite will occur.

    Going from one emerging market to another does not help in diversifying as has been rightly pointed out.

    diversification in non-correlated assets helps you to decrease risk (may or may not increase returns). 🙂

    Ramesh

  4. Investing in global funds not a great idea.
    Here two old pieces from moneylife. The data is dated but the conclusions and principles are the same
    http://www.moneylife.in/article/8/5264.html
    http://www.moneylife.in/article/81/4338.html
    More new ones are coming of which Nasdaq100 ETF is worth it and here is why
    http://www.moneylife.in/article/81/13080.html
    All the best

  5. Ramesh says:

    There is a filing of a Nasdaq100 related ETF from Motilal Oswal also, with the SEBI. Yet to come up for investing. It will be a good option too to have direct exposure to US equities.

    Ramesh

  6. Ramesh says:

    @Aniket,

    I am with you on this. You should go global. But the options are limited.

    In my opinion, the few all-weather international funds are:
    Templeton India Equity Income.
    Fidelity global real assets
    Sundaram global advantage.

    It is always better to have an international exposure. This decreases your risk.

    Ramesh

  7. randomguy says:

    Interesting that you are looking to invest in developed market where the growth rate is 1-3% in the best case scenario(many are facing deflation and negative growth). Other emerging markets are not cheap either. Compare that to India where the growth rate is 6-10% and favorable demographics. Why would you want to invest abroad even if the valuations are attractive?? Foreign investors are looking for growth in emerging markets and you are doing just the opposite!!

    Another big factor when investing overseas is the foreign exchange rate fluctuations. Indian rupee might well strengthen in the future and that will affect your investment returns. Tread carefully and good luck.

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