Friday, September 26, 2014

Should you Invest Outside India Stock Markets with these funds?

 

 

 





One of the two recently launched international funds takes asset allocation calls, while the other focuses on Japanese equities. Should they be a part of your portfolio?

 

The Indian equity markets were very volatile between September 2007 and the first half of 2013. Fund houses launched many international funds during this period to allow investors to diversify beyond the domestic market. The process of enlarging the international bouquet continues with two recent launches.

DSPBR Global Allocation Fund

This fund-of-funds (FoF) will invest in BlackRock Global Funds-Global Allocation Fund. The mother fund was launched in 1997 and has an AUM of $105 billion.


This FoF allows you to outsource the global asset allocation decision to a fund manager. Based on valuations and the prospects of equities, the fund manager will decide how much to invest in equities and how much in debt and cash. It also allows geographic diversification. Different international markets do well in different years. It is difficult for retail investors to catch these uptrends. By investing in this fund, you allow the 40-strong fund management team to decide where to invest. The fund has a lower level of volatility than pure equity funds. One risk that the fund carries is that the fund manager has more calls to take: which asset class to go overweight on, and which geography to bet on. Any of those calls could possibly go wrong. Also, if the rupee appreciates against the dollar, the fund's returns will be affected. This fund should be used more as a diversification tool. Those looking for very high returns may be disappointed. This diversified fund with a long track record can serve as the first fund in your international portfolio. You may allocate up to 5% of your total portfolio to it.

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