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Sunday, October 17, 2021

Global Funds: Is your investment sufficient for the future? If not


Global Funds / Future Portfolio

We are rapidly moving towards a globalized world. As an Indian consumer, we are taking advantage of various types of high-quality goods and services manufactured outside India. But they are not produced domestically. From mobile to luxury cars are all such examples, which we import from outside. In any corner of the world, volatility in one or more countries or commodity used globally brings instability in our domestic portfolio. Be that geopolitical risk or outbreak of the coronavirus completely unimaginable.

Risk can’t be over

One question I get asked a lot of times is how should investors eliminate risk from investing? The fact is that risk cannot be eliminated, but can be reduced by diversification. Investment diversity and managing the risks within it are also important in the Assets class. As an investor, you may be thinking that your equity investments like mutual funds, stocks, PMS are also very diversified.

The size of global markets is bigger, more opportunities

Have you considered that the market capitalization of India is 2 trillion dollars, while the market capitalization of the rest of the world is 87 trillion dollars? So if you do not invest in global markets outside India, then you are ignoring an opportunity which is almost 43 times bigger.

Apart from this, there are many innovations i.e. innovations that are affecting our lives every day by disrupting various industries and there will be a lot of implications in terms of investment. Some similar trends have emerged.

1. Mobile phone: As the penetration of mobile phones increases, the demand economy has increased. Today, using your mobile, you can drive a cab or watch favourite shows on Netflix or order food as per your convenience. It is changing the business model of hotels, content providers and other service providers.

2. E-commerce and Global Brands: Online shopping is an emerging trend. Along with this, global brands have also emerged. People from a well-to-do family are more likely to be attracted to the popular global brand than the domestic brand.

3. Cashless Society: Several types of transaction options have emerged. Such as credit card, debit card, purse, net banking, the use of cash globally is decreasing in our daily life.

4. Artificial Intelligence and Robotics: Some fascinating work is being done at the global level, from playing chess in computers to driverless cars and robots doing surgery. If you feel that you are not using Artificial Intelligence, then think again Google Maps are in front of you. Which is a living example, which you are using daily in daily life?

5. Healthcare and Therapeutics: Major innovations in this sector are making the detection and management of diseases more and more simple. Recently a chip was launched which keeps on monitoring the patient blood sugar level 24X7. The need to check it has been completely eliminated.

6. Data: As soon as a person connects to the digital world, he starts generating data through the mail, tweet, message, online surfing. There is a great need to store these huge data. That’s why new URA solutions like cloud computing are coming out.

What are the benefits of the Global Fund

Currently, there are very few descriptive innovators listed on Indian stock markets. It is also not that all work is being done in America. Companies in China, Europe, the Middle East, Africa and Latin America are doing some cutting-edge work. So if you want to participate in exciting topics for the future, then investing through Global Fund is the only option.

Investing in global funds helps you to take advantage of the depreciation in the rupee. In the last 35 years, the rupee has fallen by an average of 6 per cent. So if you are planning for the education of your daughters or sons abroad, then you will have to increase your account in the coming few years. There is an increase in the percentage of education abroad, as well as a fall in the rupee. It is worth noting that the fall in the rupee works in your favour, while the increase in the rupee removes a part of the return.

In addition, global funds are subject to debt taxation. Tax on profit may be higher. You need to invest continuously for 3 years for long term capital gains. As you think about reducing risk, your focus should be primarily on diversification and you can definitely add global funds to your portfolio.

(Author: Ajit Menon, CEO, PGIM India Mutual Fund)

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