At the present time, International Mutual Funds have gained immense popularity among Indian investors. And the biggest reason for this is that they have the ability to achieve growth in wealth by investing in global markets. International mutual funds are open-ended mutual fund schemes. It primarily invests in equity and equity-related securities of global corporate giants and others. But, these are not available for direct investment for Indian investors. Mutual Fund allows investors to be part of a much larger and more diversified portfolio if they invest in Canada. If, they have made only domestic investments.
There are over one million Indian-origin immigrants in Canada. And at the same time, Indian investments are slowly trickling into the Canadian economy. Economic stability has become a key to Canada's success and has attracted investors from around the world to its shores.
Features of International Mutual Funds – Canada
International funds offer you an excellent opportunity to diversify and earn returns by being a part of the growth of companies around the world. Like any other investment, investing in Canada has its own set of advantages and disadvantages. We have described some of the features of Canadian Mutual Funds here below –
- Need For Constant Vigilance
- Risk Factor
- Double Market Risk
- Better Market Returns
- Tax Efficiency
Need For Constant Vigilance: Political, social, and economic aspects can affect mutual fund performance differently in different countries. Hence, investors need to keep a watch on each and every movement of the market on a regular basis.
Risk Factor: Currency exchange rates fluctuate almost every day. Due to this, the value of the dollar of Canada or other international countries sometimes falls and sometimes increases. It also affects the Indian rupee.
Double Market Risk: Other country's current market volatility and regional markets can affect the fund's performance. Hence, it needs more and more research to make the right choice.
Better Market Returns: By investing in multiple economies at once, you can get high returns. Apart from reducing risk by doing diversification, foreign investment also helps in enhancing the quality of your portfolio.
Tax Efficiency: If you invest in mutual funds in Canada, there are times when taxation issues may arise, which can prove to be a potential loss for you.
Types of International / Canadian Funds
- Global Funds
- Regional Funds
- Country Funds
- Global Sector Funds
Global Funds: Global funds and international funds sound similar but in reality, they are very different from each other. Funds available all over the world including home country are called global funds. Whereas, foreign funds are available only in other countries
Regional Funds: If you invest in Canada with a focus on a particular geographic region, it becomes a local fund. However, it sometimes happens that investors buy multiple regional funds instead of investing in global funds. And they have their presence all over the country.
Country Funds: When you invest in a fund available only in the country of Canada, it is called a country fund. Because of this, it becomes easy for you to study the market out there and make a decision accordingly.
Global Sector Funds: A Global sector reserve looks closely at a particular sector of the economy in unfamiliar countries, and a worldwide sector fund is appropriate for financial backers motivated by that sector. Therefore, they primarily target openness to a specific industry.
Advantages of Mutual Funds in Canada
Business Management: When you buy mutual funds, you are also choosing a professional money manager. This manager is responsible for deciding how to invest your money. Also, it is based on a good deal of research and an overall strategy to make money.
Economies of Scale: At the present time, the easiest way to understand the frugality of scale is to consider volume discounting. In many stores, the more a product you buy, the less it costs.
Liquidity: An investor who is facing a financial emergency due to some reason may have to sell his property in a hurry. This can be disastrous if the property is hit at the wrong time. However, this happens less frequently in mutual funds.
Bottom line: If you decide to give up stock-picking and invest in mutual funds, then one last investment decision you have is to choose the fund of your choice.
Divisibility: The mutual fund owner can make a regular round sum investment every month, such as $100 or $200. It provides the investor with another small piece of multiple assets.
5 Things to keep in mind while investing in Canadian Funds –
- Fundamentals of investing in mutual funds must be followed
- The offer document should be read carefully and may also ask for clarifications if any.
- Understand the investment objective of the fund and the risks it carries
- Then, analyze whether these aspects suit your investment strategy.
- Research should be done for sector-specific funds and also assess the feasibility of investing in those sectors for the next few years
Mutual Funds to Invest in Canada for Appreciating Wealth
We have listed some mutual funds in Canada that Indian investors can consider –
RBC Select Very Conservative Portfolio
These funds are perfect for investors looking for conservative investments focused on fixed-income securities that combine earnings and modest capital growth potential. In this, the 10-year return was 5.36 percent and the 5-year return was 4.61 percent. The fund has a market value of $79.07 billion, and the minimum investment amount is CAD 500.
Select RBC Balanced Portfolio
This type of funding portfolio is similar to a fund for strategic asset allocation. Its first goal is to provide long-term capital growth and its second goal is to generate moderate income. It has given returns of 7.92 percent in 10 years and 6.84 percent in five years. The fund has a market capitalization of $76.47 billion, and a minimum investment of CAD 500.
Returns from Canadian or all foreign funds are taxed in the same way as debt funds. Capital gains are when you earn from the sale of your investments. Capital gains from selling your investments are taxed based on how long you have kept the debt under the taxation framework. It has 2 categories –
- Short Term Capital Gain
- Long Term Capital Gain
By investing in Mutual Funds in Canada, you can grow your portfolio substantially and reduce your risk. For this, you will have the opportunity to invest in multiple markets, risk levels, and industries. Thus, you can take advantage of global markets and expose your portfolio to industries and firms that you would not be able to do if you were limited to the Indian markets.
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