1) If you had invested in a global mutual fund at a time when the US dollar was worth Rs 50, the investment, after being reconverted to rupees, will fetch more. You will get Rs 58, a return of nearly 16%.
2) The extent of appreciation also depends on the amount that is invested globally and where. The funds that are invested in falling markets will naturally offer lower returns.
2) The extent of appreciation also depends on the amount that is invested globally and where. The funds that are invested in falling markets will naturally offer lower returns.
3) Some global funds invest 65% of their holdings in the Indian markets to take advantage of the tax benefits. Such funds will not deliver as high a return as those that are fully invested in global markets.
4) If you think investing now is a good idea because of the past returns, you are assuming that the rupee will depreciate further from the current level.
5) The currency risk is an additional aspect to consider in international funds. A depreciating rupee enhances their returns, while an appreciating rupee cuts into the returns.
(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre and Arti Bhargava.)
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