Is it worth investing in International funds? Whats our tax liability on this?

POSTED BY Lavanya Thomas ON January 11, 2013 3:47 pm COMMENTS (4)

Dear Friends,

Can you please let me know your thoughts on international funds? Is it worth investing in these funds? What our tax liability? Will it be same as our normal MF interms of tax?

some interesting funds which i am thinking about investing are

L&T Global Real Assets fund or the DSP BLACKROCK Natural Resources and New Energy Fund. 

4 replies on this article “Is it worth investing in International funds? Whats our tax liability on this?”

  1. Ramesh says:

    If you have a decent amount of money, only then think of investing abroad.

    Basically, it makes sense to invest outside India, but it is effective only if you have a decent amount of money.

    You can either invest in funds which directly invest in foreign stocks, eg Templeton India Equity Income or Birla International Equity. The former is treated as a normal equity fund with LTCG = 0 after 1 year. Not sure about the latter.

    Then there are feeder funds (a lot in number) which invest in specific countries (China, Asia, Emerging Markets, USA, etc). These are fund of funds and the treatment is like debt fund.

    Then there are a few ETFs (Motilal Oswal’s and Goldman Sach’s).

    L&T Global Real Assets fund is a feeder fund for Fidelity’s International fund (still managed by Fidelity). And there is no alternative asset class fund in India to that. (Personally, I invest in it).

    As with all basics, you need to have a clearer idea about investing into these diversified areas and have a proper asset allocation and rebalancing system to make the best out of them. Investing is mostly not ‘set and forget’. A proper monitoring system is a must.

    Regarding currency risk, the risk is both ways. And I believe, a proper understanding and diversification is the only method to decrease that risk. If India loses the value of its currency even more, then the foreign based funds will have a huge upside even if the actual USD value remains same (and vice versa too).

    If you are really interesting in learning more, go through this-
    http://www.bogleheads.org/wiki/Bogleheads®_investing_start-up_kit (plenty of good material there). Though the US specific terms canbe discarded, but the principles remain the same.

  2. Lavanya Thomas says:

    Thank you very much FFC.. that makes lot of sense.

    Thanks again

  3. the correlation bet Indian equity markets and other markets is high So I don’t see a distinct advantage in these funds except for some diversification within equity component.

    There is also currency risk to worry about so one should invest in emerging economies with currency similar to rupee. Might as well invest in ours!

    difficult to predict so best to limit to exposure to small % just like gold.

    personally I think it is too much trouble for returns which in the long run are likely to be similar to our markets.

    investing in individual international stocks if one has the know-how and time to research,
    international property and maybe bonds makes more sense if one has a feel for these and money (I don’t have either!)

  4. Ramesh says:

    Search for International and you will get many other similar threads, and check them. Then based upon that, you can continue here.

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