All About Investing In International Funds Post Trump's Victory In 2024 US Presidential Elections

Summary

In this conversation with Haran Runta, CFP at Runta Securities, the focus is on international investing through mutual funds. Runta discusses the current global economic environment, the importance of diversifying portfolios with international exposure, and suggests allocating 10-15% of one’s portfolio to international funds. He outlines different fund options, including index funds, actively managed funds, geographic funds, and thematic sector funds. Runta also advises caution when considering international debt investments, especially in light of global inflation and U.S. policy uncertainties. Overall, international funds offer strategic diversification and protection against currency fluctuations.

Takeaways

• 😀 Global markets are fragile, but U.S. policies under Trump are unlikely to drastically impact retail investors in India.
• 😀 Allocating 10-15% of your portfolio to international mutual funds can provide geographical diversification and exposure to global giants not listed in India.
• 😀 U.S. policy changes may affect inflation rates, but retail investors in India should avoid making substantial changes to their investments based solely on these shifts.
• 😀 International mutual funds allow exposure to global companies like Google, which are not listed in Indian markets, offering unique investment opportunities.
• 😀 Geographical diversification is key: a portion of your portfolio (10-15%) should be invested in international equities to reduce domestic market dependency.
• 😀 Dollar-denominated international funds act as a hedge against a depreciating rupee, especially beneficial for investors with future goals like funding children's education abroad.
• 😀 Simple options like index funds (e.g., NASDAQ 100, S&P 500) are recommended for retail investors who prefer low-maintenance investment strategies.
• 😀 Actively managed international funds can provide tailored exposure by investing in overseas funds, but they require careful selection and monitoring.
• 😀 Investors should choose international funds based on whether they want exposure to a specific geography (U.S., Europe, emerging markets) or a globally diversified approach.
• 😀 Thematic or sector-focused international funds, such as those investing in artificial intelligence, offer targeted investment opportunities based on global trends.
• 😀 U.S. Treasury Fund of Funds, though yielding returns, should be approached with caution due to potential high inflation from U.S. policy changes, which could affect bond yields.

Q & A

What is the overall state of the global economy as discussed in the transcript?

The global economy is considered fragile, with particular mention of the instability caused by the Russia-Ukraine war, U.S. policies, and other geopolitical tensions. While these factors affect global markets, the direct impact on individual investors, especially in India, is limited.

How might Donald Trump’s policies influence global markets, particularly from an Indian investor’s perspective?

Donald Trump’s policies, such as tariff hikes and job creation initiatives aimed at protecting the U.S. economy, could lead to higher inflation and a stronger U.S. dollar. However, these changes are not expected to significantly impact retail investors in India, who should not make substantial adjustments to their international investments based solely on U.S. political changes.

What percentage of an investment portfolio should Indian investors allocate to international mutual funds?

Indian investors should consider allocating 10-15% of their portfolio to international mutual funds to achieve geographical diversification and gain exposure to large global companies that are not listed in India.

What are the key benefits of investing in international funds for Indian investors?

Investing in international funds provides geographical diversification, access to large global companies not listed on Indian exchanges, and protection against a depreciating Indian Rupee. It also offers exposure to dollar-denominated assets, which can serve as a hedge against currency depreciation.

How do index funds and actively managed international funds differ?

Index funds track international market indices such as the NASDAQ 100 or S&P 500, providing passive exposure to global markets. Actively managed international funds, on the other hand, are managed by fund houses that select and allocate investments across global assets, potentially offering higher returns but at higher management costs.

What should Indian investors look for when choosing an international mutual fund?

Investors should consider the type of fund (index vs. actively managed), the geographical focus of the fund (U.S., emerging markets, etc.), and whether the fund follows a thematic or sectoral approach (e.g., technology or AI). They should also check the convenience and costs of investing in the fund from India.

What is a 'fund of funds' and how does it work in the context of international investments?

A fund of funds is a mutual fund that invests in other mutual funds rather than directly in securities. In the context of international investments, an Indian mutual fund might pool domestic investments and invest them in a foreign mutual fund managed by an overseas fund house, giving investors access to international markets.

What are the advantages of investing in dollar-denominated international funds?

Dollar-denominated international funds offer a hedge against the depreciation of the Indian Rupee. If the Rupee weakens, the value of these funds could rise, providing additional returns through currency appreciation, making them attractive for long-term goals like overseas education.

What is Haran Runta’s opinion on investing in international debt funds or U.S. treasury funds?

Haran Runta advises caution when it comes to investing in international debt funds or U.S. treasury funds. While these assets offer yields, the uncertain global economic environment and potential interest rate cuts make it advisable to wait until there is more clarity on U.S. economic policies before making such investments.

What is the suggested investment approach for retail investors looking to invest internationally?

For retail investors, Haran recommends simple, passive strategies such as investing in international index funds (e.g., NASDAQ 100 or S&P 500) or diversified global fund-of-funds. These options are easy to track, provide broad exposure to international markets, and do not require active management or complex financial knowledge.