Tagged: Mutual Fund

NTH :: 6 ways new classification of mutual fund schemes will impact the investor

By Sanket Dhanorkar, ET Bureau|Updated: Oct 16, 2017, 11.20 AM IST


The Securities and Exchange Board of India (Sebi) has asked fund houses to classify their schemes into clearly defined categories. For long, there were no clear guidelines to categorise mutual funds. Fund houses even launched multiple schemes under each category, making scheme selection a confusing exercise for investors. To introduce clarity, Sebi has now asked fund houses to have just one scheme per category, with the exception of index funds, fund of funds and sector or thematic schemes.Mutual funds which have multiple products in a category will have to merge, wind up, or change the fundamental attributes of their products.

Simplification of choice, fewer options
At the broadest level, mutual funds will now be classified as equity, debt, hybrid, solution-oriented, and ‘other’. Equity schemes will have 10 sub-categories, including multicap, large-cap, mid-cap, large- and mid-cap, and small-cap, among others. The stocks of the top 100 companies by market value will be classified as large-caps. Those of companies ranked between 101 and 250 will be termed mid-caps, and stocks of firms beyond the top 250 by market cap will be categorised as small-caps. Debt and hybrid schemes will similarly be grouped into 16 and six sub-categories respectively.

In particular, people interested in debt and hybrid schemes will now be better placed to identify the right schemes. For instance, duration funds have been segregated into four sub-categories, based on the maturity profile of the instruments they invest in. Debt funds belonging to the broader ‘income funds’ category will now be identified as dynamic bond fund, credit risk fund, corporate bond fund, and banking and PSU fund, based on their unique characteristics. Similarly, segregation of hybrid funds—based on their equity exposure—as aggressive hybrid, conservative hybrid and balanced hybrid, will allow investors to better identify the type of hybrid fund they want to invest in.

“Now that scheme labelling is clearly linked to a fund’s strategy, the investor will clearly know what he is getting into. The fund category will define the scheme, and not its name,” says Kunal Bajaj, CEO, Clearfunds. Fund houses will also not be allowed to name schemes in a way that only highlights the return aspect of the schemes— credit opportunities, high yield, income advantage, etc.

Adherence to fund mandate
With strict classification of schemes, fund houses may not be able to alter the investing style or focus of their schemes, as they did earlier. For instance, mid-cap funds stray into the large-cap territory or across market caps, in response to market conditions, which dramatically alters their risk profile. Now, funds will be forced to maintain their investing focus. Any drastic change in style will constitute a change in the fundamentalattributes of the scheme, which would have to be communicated to the investors. For investors, this means they won’t have to worry about their chosen schemes altering mandates to something which doesn’t suit their needs or risk profile.

Better comparison with peers
Distinct categorisation of schemes will also enable a better comparison of funds within the same category. While the earlier largecap funds category had schemes with pure large-cap focus as well those with a sizeable mid-cap exposure, now such distinctly varied schemes won’t be clubbed together. This will further help investors identify the right schemes by facilitating a like-for-like comparison of funds. “All schemes of different AMCs within a similar category will have similar characteristics, which will enable customers to make a better ‘apples to apples’ comparison,” says Stephan Groening, Director, Investment Solutions, Sharekhan, BNP Paribas.

These schemes may be reclassified or merged
The new Sebi norms require funds to have only one scheme per category.
6 ways new classification of mutual fund schemes will impact the investor
Note: This is only an indicative list. All schemes mentioned may be retained by the respective fund house. There may be other duplicate schemes from other fund houses also. Source: Value Research.

Sharp rise in fund corpus
Since fund houses will now be forced to merge duplicate schemes within the same categories, it may sharply increase the size of certain funds. This could hurt the scheme’s performance. “Some larger fund houses with multiple schemes will have to opt for mergers. This may lead to a sudden, sharp rise in the corpus of schemes, which could dent the fund’s returns,” says Vidya Bala, Head, Mutual Fund Research, FundsIndia. “There could also be an impact cost on the investor, as fund may rebalance or churn the portfolio to ensure the fund aligns with the category norms,” adds Bala. For instance, both HDFC Balanced and HDFC Prudence are aggressive hybrid funds, with a corpus of Rs 14,767 and Rs 30,304 crore. Merging the two will create a Rs 45,000 crore fund. However, it is more likely that the fund house may instead reposition one of the schemes in another category.

Possible fall in outperformance
While the new norms are likely to lead to better adherence to the fund style and mandate, it may result in reduction in alpha—outperformance compared to the index—for some schemes. Funds often tend to stray away from their chosen mandate in the pursuit of generating excess return over the benchmark index. Now, with limited flexibility to stray into another segment, some funds may find alpha generation more difficult than before, reckons Bala.

Need for portfolio review
Since fund houses will now have to align their product suite with these norms, there is likely to be a flurry of activity related to recategorisation of funds. In order to avoid merging certain duplicate schemes, these are likely to be renamed or reclassified into another fund category. Some funds may witness a change in scheme attributes to facilitate its repositioning. As such, over the next 5-6 months, several schemes may change colours. Investors would then have to undertake a thorough portfolio review to ensure their funds continue to meet their requirements, insists Bajaj.

Source: https://goo.gl/kEwrFg





ATM :: Why active funds beat the markets in India

On an average, the gross returns by active funds exceed returns from Nifty by more than 11%. This outperformance is after accounting for the costs of managing an active fund
Nilesh Gupta & G. Sethu | First Published: Mon, Oct 02 2017. 01 59 AM IST | Live Mint


In 1975, John Bogle launched the first ever passive fund, Vanguard 500 Index Fund, and heralded an era of passive investing. Bogle was influenced by Eugene Fama’s view that the capital market was informationally efficient and that sustained success in stock picking was impossible. Since then, trading has increased; more and better investment research is being undertaken; high-speed communication networks have taken away the advantages to a privileged few; and most importantly, institutional investors dominate the markets. In this environment, it is not easy to pick stocks or enter and exit the market successfully and consistently. The torchbearer for passive investing today is the exchange-traded fund (ETF).

In the US, during FY 2003-16, total net assets of equity index funds increased by 3.5 times (from $0.39 trillion to $1.77 trillion), while that of active equity funds increased by just 0.7 times (from $2.73 trillion to $4.65 trillion). More importantly, during this period, a net amount of $1.29 trillion moved out of active equity funds while $0.46 trillion moved into index equity funds. Why is passive investing gaining over active investing? It’s because active investing has not been able to deliver returns (net of costs) that are more than from passive investing. Passive funds posted an expense ratio of 0.09% in 2016 while active equity funds were seven times more expensive with an expense ratio of 0.63%.

The FT reports that over a period of 10 years, 83% of active funds in the US underperform their benchmark, with 40% funds terminating before 10 years.

This global trend prompted us to examine the India story. Since 1992, Indian stock markets have seen many developments. Trading has increased; there are more institutional investors; regulations have improved; transactions have become faster; settlements have become shorter; number of analysts covering the market has increased; communication networks are good. We should expect active funds to struggle to beat the market, right? You could not be more mistaken.

We examined the returns and expense ratios of 448 actively managed mutual fund schemes from the period of FY 1996 till FY 2017, a total period of 21 years. We used their net asset values (NAVs) to compute the returns from holding these schemes for each financial year. Remember that the NAVs of mutual fund are published after deducting all the costs incurred in running the scheme.

In most of the years, when the market booms the active funds beat the index (such as Nifty) by a wide margin. When the market is bearish, their performance is mixed. In some bearish years, they beat the index, but often they lose much more than the index.

On an average, the gross returns by active funds exceed returns from Nifty total returns index by more than 11%. Remember that this outperformance is after accounting for the costs of managing an active fund. What about the costs of managing a mutual fund? The expense ratio for active funds from FY 2008 to FY 2017 averaged 2.32% per annum and for ETFs it was 0.61%, leading to a difference just greater than 1.7%. On an average, in India the extra returns provided by actively managed mutual funds have been much higher than the extra cost charged for delivering the return.

This is in contrast to the data from the US. Even in the halcyon 1960s, active funds in the US beat the market only by about 3%. What are the possible reasons for this outperformance? Some market experts argue that several quality stocks are not part of the index and hence index funds or ETFs cannot invest in them. Some note that the evolving nature of the market is not reflected in the index.

It may also be possible that the relatively smaller size of the mutual fund industry in India could be helping active fund managers get such high returns. In India, the mutual fund industry has only 13% of market capitalization as compared to 95% in the US. It is possible that in the past, mutual fund managers had better information available. If either of the reasons turn out to be true, we might find that, in the future, the actively managed mutual funds do not outperform the market by such large margins.

So, should Indian investors invest their savings in actively managed mutual funds? Irrespective of what the data says, the answer is not so simple. Here we have only considered the average returns of all actively managed mutual funds. A retail investor who is likely to invest only in a limited set of schemes would be concerned about choosing those schemes that give better returns in the future.

This analysis has not considered the risks taken by the mutual funds to get returns. A fund can easily beat the market by taking more risks. We need to compute the risk-adjusted returns to answer this question. On doing that, we may understand how the active funds in India generate such high returns compared to the market index. Is it a story of great fund management skills? Or is it inefficiency of the market? Or is it a case of taking high risks? Investors and the regulator have a responsibility to understand this.

Nilesh Gupta is assistant professor and G. Sethu is professor at the Indian Institute of Management, Tiruchirappalli

Source: https://goo.gl/1BK5FJ

ATM :: How is your mutual fund performing? Triggers that should alert you to exit

Sarbajeet K Sen | Sep 14, 2017 11:37 AM IST | Source: Moneycontrol.com
Poor performance of a fund must set the investor thinking on whether to continue with the investment.


When did you last review your mutual fund portfolio? Maybe a long time ago. Many investors might feel relaxed after investing in mutual funds with the thought that their money is safe with experts trained in investing and stock selection.

However, the mutual funds landscape is a mixed lot. There are good, high-performing funds and there are laggards who are unable to keep up with performance of the leaders.

Did you check which of these category of fund you have invested? If it is one of the top-performing ones, giving you good returns, you need not worry. But if it is one of the funds that have not performed well in comparison, it might be time to think of a switch to another fund.

So when did you last review your mutual funds investment portfolio to know whether it needs a change? If you do it periodically, well and good, but if you have not reviewed for a long time, you should assess how your various fund investments have been performing.

“Investors should review their mutual fund portfolio at least once in 6 months. They should look at the performance of the fund, the sectoral allocation that they chose and whether there have been any big changes,” S Sridharan, Business Head, Financial Planning, Wealth Ladder Investment Advisors

Sridharan says if the review shows that the fund has performed poorly, it should signal a possible exit and switch to another fund. “Poor performance of a fund must set the investor thinking on whether to continue with the investment. However, exit decision should not be based only on performance of the fund. Investors should look at other parameter like what went wrong and whether the fund manager has the capability of revising the portfolio to the positive side in the near future,” he said.

Vikash Agarwal, CFA & Co-Founder, CAGRfunds, says one should avoid unnecessary churn in portfolio. “The essence of money-making is regular investments in well-managed diversified equity mutual funds. One should avoid unnecessary churns in the portfolio which may enhance cost in terms of exit load and tax implications,” he said.

However, Agarwal says there can be multiple reasons which might merit a review and change of one’s mutual fund holdings. Some of these are:

Continued underperformance of the fund such that the fund is unable to beat its benchmark

-The fund is able to beat the benchmark but the returns are not commensurate with the levels of risk being taken by the fund

-A particular stock/debt instrument holding which forms a significant holding of the fund is likely to underperform due to a fundamental issue. Example: If a fund has significant exposure to a company which has acquired a loss making company, it might merit a deeper review of the fund

Change of fund manager: In case there is a change in fund manager, then it is useful to review the fund as the fund style and philosophy might undergo a change and it might not be suitable to investment objective anymore

“If your fund is showing such characteristics then it is ideal for you to exit and switch to a better managed fund,” Agarwal said.

Source: https://goo.gl/dKawWa

ATM :: How equity mutual funds can pave your way to becoming a ‘crorepati’

Navneet Dubey | Sep 19, 2017 04:18 PM IST | Source: Moneycontrol.com
Equity mutual funds can give you good returns if you keep your money invested over a long period of time to overcome market cycles.


Your dream of becoming a ‘crorepati’ may seem difficult. But in reality, if you plan your finances and invest in the right instruments someday you will have your dreams realised someday. One of the best ways to try and achieve the crorepati dream could be investing in equity mutual funds for good returns over a long period of time. There is a definite correlation between the time and money. If you have less money to invest then you have to wait for a longer time to get your goal accomplished and if you have more money to invest you might reach your goal earlier if you plan and invest properly.

However, before investing in mutual funds, especially –equity MF’s, you should ask yourself two questions:

how much you have to invest and over how long to reach your Rs 1 crore destination.

Here we try to get you answer to both the questions.

How much to invest monthly?

As a young investor, you may easily take a higher risk by saving less amount and gain more returns to achieve your financial goals. While being in the middle of the age, you can take the moderate risk to head toward becoming a crorepati.

Thus, at an early age even if you have less money to invest, you can become crorepati by investing Rs 700 per month (which is the least amount) for 35 years, at an assumed 15% rate of return to accumulate the desired amount.

However if you start later, you need to invest more money to reach your financial goal. For instance, you will need Rs 5500 per month for 25 years, at an assumed 12% rate of return, you will be able to make Rs 1 Crore approximately.

A larger amount of Rs 13,500 per month for 20 years, at an assumed 10% rate of return, will enable you to make Rs 1 Crore.

investment grid

How to select a fund?

To earn 12-15% of return on your investment, you need to select good equity stocks or one can go for equity mutual funds to mitigate the risk to an extent. While selecting, equity MF, you need also check that your portfolio should have mid-cap/small-cap funds for around 30-40% and the remaining 60-70% should have a diversified fund, a large-cap fund, etc. to maintain an aggressive portfolio with right asset mix.

Whereas to maintaining a return of around 10-12%, you should invest in balanced fund/hybrid fund, etc. to maintain a moderate risk portfolio. In such case, one can avoid or reduce the investment amount in mid-cap/small-cap funds or avoid making investments in risky stocks.

Are there alternatives?

Investing money in pension plans, NPS can also help you achieve this financial goal. However, the returns offered under such schemes are not stable and market linked. Moreover, in some instruments, returns are subject to change as per the government rules. Also, investing in an instrument like fixed deposits, national savings certificate, etc. may not help you achieve the goal within the maximum time period as mentioned thereon.

One should also have to remain invested for a longer time period and follow proper asset allocation strategy to achieve the target amount. It is must to take the help of a financial adviser before making such financial decisions.

In the grid given above, make sure you know that any investment made in equity mutual fund or equity stocks are not guaranteed. The returns are also volatile and not fixed as they are dependent on the financial market.

Source: https://goo.gl/3sQvvt

ATM :: Explained: You should invest in following debt mutual funds based on your risk profile

While debt funds, unlike fixed deposits and small saving schemes are also subject to market risk, though less than equity funds, the return expectation is commensurately higher than traditional products over the same tenure.
Kirtan Shah | Aug 24, 2017 10:19 AM IST | Source: Moneycontrol.com


Lately I have been meeting a lot of relatives, friends & acquaintances, grappling about a common concern of what to do now with the new normal of low interest rates on fixed deposits & small saving schemes. It is very disturbing for many because of their investment style and return expectations from the past. Invest in mutual funds, I said. ‘Don’t mutual funds invest in stocks?’, ‘Aren’t mutual funds risky?’, ‘Will I get fixed returns?’ they asked. Mutual Funds as a product offering which can invest in equity, debt, commodities and even a combination of them depending on the objective of the fund and hence investors across risk profiles, goals & time horizon will find a suitable product, I said.

Why Debt Funds

(1) Tenure of investment – Regardless of your time horizon, there is a suitable debt mutual fund available.


(2) Tax Efficiency – This is the reason why most FD investors will appreciate debt mutual funds. If you invest for less than 3 years, the gains are taxed at the income tax slab rate like in an FD but if you hold the investment for more than 3 years, the gains are taxed at 20% (even if you are in the 30% tax bracket) and that too not on the full gains but only on the gains that exceed inflation. So if you earn 8% on the debt fund and inflation (measured by CII) increases by 5% in the same period, you pay 20% tax only on 3% (8%-5%), which is 0.6% (20%*3%) versus 2.4% (8%*30%) 4 times higher in an FD investment. The post tax return on a debt mutual fund is far superior to a FD, even when we are assuming that the debt fund will generate returns similar to the traditional products.

(3) Possibility of higher returns – Return is a function of calculative risk taken. It is not that FD does not have any risk. It is presumed to have no risk, which may not be entirely true.

Let me highlight a couple of risks that all fixed income instruments have.

(a) Interest Rate Risk – Lets assume you have invested in a FD paying 7.5% return over 3 years. What if interest rates in the market move up? The same institutions will then pay 8% to the new depositor vs you still receiving 7.5%.

(b) Reinvestment Risk – In the same case above, if the interest rate moves down, you will get a lower rate from the same institution, when you try and reinvest after 3 years. This is the challenge most traditional product investors are currently facing and will continue to face in the future. Over the last 15 years, investors have seen bank FD’s paying as high as 12% as well but the average over the last 15 years is 8.5% on the bank FD.

(c) Inflation Risk – While the above investment matures after 3 years, you realize that inflation has moved up by 5% in the same period. The net result on your investment is not 7.5% but only 2.5%, which we call as the real rate of return. Most of the times you will observe that inflation is increasing at a pace faster than the returns offered on the FD, generating negative real return.

All the above are risks that one has to take irrespective of the fixed income instrument they invest in. While debt funds, unlike fixed deposits and small saving schemes are also subject to market risk, though less than equity funds, the return expectation is commensurately higher than traditional products over the same tenure. In the below chart you will see how various debt fund categories have performed over the last 3 years.


Risks in a Debt Mutual Fund

Interest Rate Risk – Debt funds invest in various fixed income instruments issued by the government, banks & financial institutions, RBI, corporates etc., which are mostly traded on the exchange helping the fund to generate higher returns over the interest (coupon) committed. The price of the traded fixed income instrument is inversely proportional to the market interest rate. Lets say the debt fund bought a government bond paying a coupon (interest rate) of 8% and is now trading in the market. In the future when interest rates drop, government would issue a new bond at a lower interest rate, say 7.5%. Everything else kept constant, it’s logical to buy the old listed bond, which pays higher interest rate of 8% than the new bond and hence the price of the old bond increases because of higher demand, generating capital gains for the debt fund over and above the 8% coupon. Interest rate risk in the bond fund is captured by modified duration. Higher the modified duration, higher is the risk and higher are the return expectations. If a fund has a modified duration 2, it means for every 1% drop in market interest rate, the debt fund will generate positive 2% returns over and above the YTM (investors can understand this as the coupon/interest rate). The table below will help you understand the interest rate risk profile of various debt funds.


Conclusion – If you want to take lower risk, select funds with lower modified duration.

Credit Risk – The fixed income instruments in which the debt funds invest are credit rated. Credit rating agencies give a rating to all these instruments showcasing the credit worthiness of the issuer to pay interest and return the principal. Higher the credit rating, lower the risk and hence lower is the coupon the issuer pays and vice versa. So let’s say, if the debt fund buys an instrument, which is highly credit rated at AAA, fund will receive a lower coupon rate, as the risk is low. Unfortunately, in the future if the credit rating agency reduces the credit rating to AA, the debt fund will still receive the same coupon that was committed earlier but the risk has increased and hence this fixed income instrument will start trading at a lower price on the exchange, incurring capital loss to the debt fund. The inverse is also true. The point to be noted is that the capital loss is only notional. If the debt fund does not sell the fixed income instrument in the market and continues to hold, it still receives the coupons committed as normal. The table below will help you understand the credit risk profile of various debt funds.


Conclusion – To reduce the risk, select funds, which invest in high credit rated products.

The right debt fund for you

The answer to which debt fund you should invest in, depends on your goal and risk profile. If your investment horizon is less than 3 months, the most ideal option is investing in a liquid fund. Having said that, you can invest in any other scheme from the list below, but the risk profile of the fund may increase if invested for less than the ideal investment horizon. Lets say you choose to invest in corporate bond funds for 3 months to generate higher returns, you have to understand that the risk will be higher than normally holding the corporate bond fund, which is medium if held for more than 2 years. The below table will give you a clear snapshot of which fund debt fund suits your requirement.


The writer is CEO – Sykes & Ray Financial Planners

Source: https://goo.gl/wwfZMx

ATM :: 5 reasons why mutual funds have tanked up on banking stocks

Despite the red flags staring at most Indian banks, mutual fund managers do not seem to bother about them. Reports say that the allocation to the banking sector by mutual funds has reached an all-time high of Rs 1.47 lakh crore at the end of June.
Shishir Asthana | Moneycontrol Research | Jul 28, 2017 06:14 PM IST | Source: Moneycontrol.com


In a recent survey conducted by Moody’s Investor Service, 70 percent of market participants pooled said that India’s banking system was the most vulnerable in South Asia. Stress in the banking system has made headlines for over three years now. Analysts, experts, and economists have all predicted doomsday which has not yet come. However, to be fair to experts the balance sheet numbers of the banks have continuously deteriorated in most of the cases.

Despite the red flags staring at most Indian banks, mutual fund managers do not seem to bother about them. Reports say that the allocation to the banking sector by mutual funds has reached an all-time high of Rs 1.47 lakh crore at the end of June.

Why would funds like to invest in banks which everyone fears will implode? Here are five reasons we think banks are on mutual funds’s radar.

Valuation: Given the current valuation in markets, very few sectors offer a good risk-reward bet. With Nifty over 10,000 and market price-to-earnings in the top quadrant, there are few sectors and stocks that offer value. While Bank Nifty has touched a new high of 25,030, there are stocks in the sector, especially in the public sector space, that offers better valuation but higher risk.

Liquidity: Mutual funds in India are witnessing heavy inflows. New investors and higher investment through systematic investment plan (SIP) is compelling mutual funds to take more risks. Despite record investments in the banking sector, mutual funds are still sitting on cash levels of 5.7 percent on an aggregate basis. Some funds have cash positions ranging between 8-18 percent. Peer pressure and rising markets compel them to invest.

Index weightage: One parameter that every fund manager is ranked on is his performance with respect to the index. As weightage of banking stock in the index is high at near 30 percent, fund managers are compelled to buy banking stocks in order to be close to the index performance.

Too precious to fail: Though asset qualities of most banks are questionable these banks are all too big to fail. For the government and the central bank, it will be very embarrassing to allow a bank to fail. Both the central bank and the government have been trying to recapitalise banks, tweaking the rule books, bringing in new schemes to help banks clean up their books. Bankruptcy law is now cleared and cases are registered. This is expected to go a long way in recovery and solving the problem with bigger non-performing assets. Apart from these measures, the government has also initiated merging of weaker banks with the stronger ones, in turn, creating a bigger and stronger bank.

Proxy for growth: The banking sector has traditionally been considered as a proxy for the economy. Every activity in the economy requires money. Banking sector credit growth has historically been between 2-2.5 times GDP growth. However, with the toxic asset problems and other sources of non-banking finance available in the market, the ratio has fallen to nearly 1.6 times the GDP. This ratio is expected to improve as banks start lending again in line with the growth in the economy.

Source: https://goo.gl/fRA8CU


ATM :: Want to invest in companies like Google, Facebook, Coca Cola from India? Here’s how you can do

Global Fund investment options albeit limited have been around for a decade, with options to invest into US, Europe, ASEAN, country specific funds like Brazil & China and even funds investing into natural resources companies like Gold mining companies or Energy companies.

By Kaustubh Belapurkar – Morningstar India | Jul 15, 2017 11:02 AM IST | Source: Moneycontrol.com


International Funds from an Indian investor’s perspective have been a little bit of a hit and miss.

Global Fund investment options albeit limited have been around for a decade, with options to invest into US, Europe, ASEAN, country specific funds like Brazil & China and even funds investing into natural resources companies like Gold mining companies or Energy companies.

The greatest amount of investor interest has typically been in Gold mining funds and US funds. In fact in 2013, when the Indian equity markets where going through a prolonged lull phase, domestic equity funds too were witnessing stagnating growth.

At the time investors increased allocation into US Funds on the back of strong 1-year historical returns of these funds. Post that, though the story has been very different, with the start of the domestic equity market rally in 2014, domestic fund flows are reaching new highs, but Global funds are witnessing a slow trickle of redemptions.

As an effect of this global funds currently forms a minuscule proportion of investor’s portfolio at 0.28 percent from a high of 1.56 percent in Jan 2014.


Why Invest in International funds

Investors should consider adding international funds in their portfolios from the perspective of diversifying risk in their portfolios.

Investments should be made for the long term on an overall portfolio allocation basis rather than a decision based on short term historical performance.

By adding international funds in your equity portfolio, you can potentially reduce the overall volatility in your portfolio by as much as 5-10 percent.

It is important to acknowledge that markets go through cycles and no market will be a top performing market year after year as is visible in the table below.

In addition, Indian markets display a lower correlation with developed markets like the US, thus the addition of such exposures helps reduce overall portfolio volatility.

The calendar Year Index Returns (INR)


Another factor to consider is the ability to take exposure to sectors or companies that you would ordinarily not have exposure to.

Global Companies like Amazon, Google, Facebook, Coca Cola, etc. are widely known and used brands in India, they derive a fair share of the revenues/users from countries such as ours. By investing in these funds, you can potentially gain exposure to such stocks.

Investors should certainly think about adding an international flavor to their portfolio and stay invested for the long term. You can consider investing 15-20% of your overall equity exposure into global funds.

Disclaimer: The author is Director of Fund Research at Morningstar Investment Adviser. The views and investment tips expressed by investment experts on Moneycontrol are their own and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.

Source: https://goo.gl/MUx88e