Investing in overseas markets has gathered pace in the recent past. Many asset management companies (AMCs) had introduced subscriptions for international schemes to maximise inflows ahead of the new taxation rules for debt mutual funds, which kickstarted from April 1, 2023.
Generally, exchange-traded funds (ETFs), as the name suggests, are funds that are exchanged on stock markets daily. Similarly, an international ETF is a fund that invests in overseas stocks, commodities, bonds, foreign markets, etc.
International ETFs offer investors an opportunity to diversify in foreign markets. Typically, such funds invest in a wide spectrum of companies and businesses across multiple sectors, including technology, healthcare, consumer goods, finance, etc.
In order to purchase international ETFs, local and foreign brokerage firms can be suitably approached.
When it comes to benefits, ETFs are an ideal way to invest as they reduce trading risk by simply mirroring the movement of the index.
Many of the international ETFs provide access to the Nasdaq and other such critical global indexes. The investments would be under the total Liberalised Remittance Scheme (LRS) limit.
While several AMCs or fund houses have expanded their international schemes, rushing to invest in such schemes solely for the purpose of capitalising on a change in taxation is not a prudent move.
Investor should remain focused on their long-term investment plan and not be carried away by any recent development in terms of change in taxation.
An investor who may have planned beforehand to assign funds to international ETFs in the next few months could look at taking advantage of the current development. The only criterion is that they must be in possession of a readily available lump sum amount. The returns on overseas ETFs may be higher, and so is the risk associated with them.
An investor needs to take all such factors into account before making the move to invest in international ETFs.
Rajiv is an independent editorial consultant for the last decade. Prior to this, he worked as a full-time journalist associated with various prominent print media houses. In his spare time, he loves to paint on canvas.
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