International ETF

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International ETF



About

An international exchange traded fund (ETF) is any ETF that invests specifically in foreign-based securities. The focus may be global, regional, or on a specific country and may hold equities or fixed-income securities.

ETFs that invest in a single foreign country may carry higher risks than international ETFs that spread their investments among many countries.

Why to invest?

Global investment provides an additional source of wealth creation in your portfolio and helps diversify the risk. Globally, different markets have performed better in different periods and the winner keeps on rotating across the geographies as the performers and laggards may change even on a year to year basis. In fact, if we compare the benchmark indices, US markets have created more wealth for the investor than Indian markets in the previous 3, 5, 10-year period in their local currency and even higher if we look at the returns in INR terms. Investors should note that depreciation of INR over the long-term v/s the stronger currency like USD, will add to the returns and vice-versa. The home bias should not stop investors from exploring these opportunities, if it fits into his or her risk profile.

Who to invest?

It can be easily bought and sold same like that of stocks through the exchange. It is a good option for the diversification of your portfolio. It is best suited for those who want to have a diversified portfolio with all their risk divided into various channels and with long term perspective view.

Pros:-

  • Diversification as One ETF can give exposure to a group of equities, market segments, or styles. 
  • Limited Capital Gains Tax as ETFs can be more tax-efficient than mutual funds. As passively managed portfolios, ETFs (and index funds) tend to realize fewer capital gains than actively managed mutual funds.
  • Trades Like a Stock Although the ETF might give the holder the benefits of diversification, it has the trading liquidity of equity 
  • Lower Fees as ETFs, which are passively managed, have much lower expense ratios compared to actively managed funds, which mutual funds tend to be.                                                                    

Cons:

  • Lower Dividend Yields as There are dividend-paying ETFs, but the yields may not be as high as owning a high-yielding stock or group of stocks
  • Costs Could Be Higher as Most people compare trading ETFs with trading other funds, but if you compare ETFs to investing in a specific stock, then the costs are higher.
  • Intraday Pricing Might Be Overkill Longer-term investors could have a time horizon of 10 to 15 years, so they may not benefit from the intraday pricing changes


Investment options available

There are two modes of transacting in ETF which happens around intraday indicative net asset value

  • On Exchange, just like stocks, in as low as 1 unit
  • Directly with the AMC, in larger quantum as specified for an ETF

Best International ETF’S are as follows:-

  •  Nippon India ETF Hang Seng Bees 
  • Motilal Oswal NASDAQ 100 Exchange Traded Fund 


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