Global Index Funds
Diversify your portfolio internationally with Global Index Funds, which invest across a broad range of countries and industries worldwide. These funds aim to track the performance of global indexes, offering exposure to the world's leading companies.
An annualised return of approximately 16-22%
A low-cost passive investment strategy
Lower risks through diversification
Offers lower expense ratios
What are Global Index Funds?
With global index funds, investors can diversify their fund portfolios even further as these funds pool their money and invest in stocks or assets from various countries around the world, mirroring the performance of global market indices.
This type of fund aims to provide an average annual return of 16-22%, offering a blend of growth and risk management. They're designed for investors looking to expand beyond domestic markets and explore global economic growth.
Best Global Index Funds Based on Last 3-Year Returns
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Mirae Asset NYSE FANG+ ETF Fund of Fund Direct Growth▲ 19.39%AUM ₹1462 Cr •
Expense 0.72%
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Kotak NASDAQ 100 Fund of Fund Direct Growth▲ 14.06%AUM ₹3200 Cr •
Expense 0.3%
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Motilal Oswal S&P 500 Index Fund Direct Growth▲ 13.73%AUM ₹3543 Cr •
Expense 0.62%
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SBI International Access - US Equity FoF Direct Growth▲ 13.46%AUM ₹940 Cr •
Expense 0.9%
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ICICI Prudential US Bluechip Equity Fund Direct Plan Growth▲ 12.29%AUM ₹3336 Cr •
Expense 1.15%
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Nippon India US Equity Opportunities Fund Direct Growth▲ 9.15%AUM ₹681 Cr •
Expense 1.3%
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Axis S&P 500 ETF Fund of Fund Direct Growth--AUM ₹0 Cr •
Expense 0%
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Aditya Birla Sun Life NASDAQ 100 FOF Direct Growth--AUM ₹390 Cr •
Expense 0.65%
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Navi NASDAQ 100 Fund of Fund Direct Growth--AUM ₹978 Cr •
Expense 0.15%
- Axis NASDAQ 100 Fund of Fund Direct Growth--
AUM ₹171 Cr •
Expense 0.24%
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Benefits of Investing in Global Index Funds
To know some major advantages of global index funds, check the pointers below.
Diversification
Since global index funds are exposed to diverse markets across the world, these provide some of the greatest opportunities to spread your investments in international markets and sectors.
Cost-Effectiveness
A global stock index fund is a passive approach to tracking a global index, so it tends to have lower management fees as compared to an actively managed fund. Hence, it is cost-efficient.
Transparency
Investors can easily understand where their money is going because these funds aim to replicate the performance of well-known global indices.
Convenience and Simplicity
Instead of researching and selecting individual international stocks, investors can achieve a well-rounded global portfolio through a single investment, with the fund manager handling the complexities of international investing.
Growth Potential
By putting money into markets around the world, you can benefit from the growth of different countries. This means you can make more money than just investing in your own country, especially if other economies are doing better.
Access to Top Global Companies
Global index funds give you a share in some of the world's most successful and influential companies across various industries. This means you're not just investing in different countries, but also in top-performing firms.
Who should invest in Global Index Funds?
Given below are some of the categories of investors who can consider investing in global index funds:
Investors Having Long-Term Investment Horizon
Index funds tend to experience a lot of fluctuations in the global market if invested for a short period. These fluctuations in the market conditions can average out the gains if you invest them for a considerably longer period. Therefore, if you are among the investors who have a long-term investment horizon, these funds would be an ideal option for you.
Investors Having Risk Appetite
Index funds are less prone to equity-related risks and volatilities since these funds replicate a particular index of the global market. However, index funds may lose their value during a slump, and, hence, can experience a market downturn, affecting the potential returns of the investors. Therefore, investors with a good risk appetite can consider opting for global index funds.
Investors Who are New to Mutual Funds
It can be a good idea to invest in a global index for investors who are new to mutual funds. As newcomers, they can get exposed to stocks without experiencing too many risks. You can also be aware of the diversification of a vast range of companies across the world. Besides, by investing over a long period, you can see the maximum benefits.
Points to consider before investing in Global Index Funds
There are a few things that you must consider before you put your money in a Global Index Fund. Let's check them out!
Market Volatility
While Global Index Funds offer diversification, they're also subject to international market fluctuations. Political, economic, and currency risks in different countries can impact your investment. It's essential to be prepared for potential volatility and consider how these global factors might affect your portfolio.
Taxation
Understand the tax implications of investing in Global Index Funds. The taxation rules for international investments can be different from domestic ones and may vary based on your residency. It's important to know how dividends, capital gains, and foreign taxes will affect your returns and to plan your investments accordingly.
Research the Index
Not all Global Index Funds are the same. They may track different indices, focusing on various regions or sectors. Before investing, research the specific index the fund is tracking to ensure it aligns with your investment goals and risk tolerance. This will help you better understand the potential growth and risks associated with the fund.
Limitations of Investing in Global Index Funds
Apart from the advantages, there are a few limitations that you must be aware of before investing in global index funds.
Currency Rate
The opportunities for diversification in global index funds provide better chances of getting higher returns. However, any changes in the currency exchange rates may affect your fund portfolio, resulting in lower returns than what was anticipated. Hence, changes in exchange rates can be a hindrance for relevant currencies.
No Direct Control
Usually, investors do not tend to have direct control over their investment strategies in any mutual funds scheme. However, in the case of global index funds, even the fund managers do not have direct control of the investment strategies on behalf of investors. This lack of control may not be extremely impactful for the newcomers with their limited knowledge.
Complex Taxation
The tax treatment for earnings from Global Index Funds can be more complex than domestic investments. You may face foreign tax liabilities, and the process for claiming tax credits or deductions for taxes paid in other countries can be complicated, potentially affecting the net returns on your investment.
How to start investing in Global Index Funds with INDmoney?
Ready to invest in Global Index Funds through INDmoney? Here's a simple step-by-step guide to get you started:
Step 1
Download the INDmoney app, sign up, and complete your (KYC) (Know Your Customer) to open a free investment account.
Step 2
Once your account is set up, look for Global Index Funds inside the Index Funds Catalogue.
Step 3
Choose a Global Index Fund by researching its past returns, volatility, AUM, expense ratios, and underlying stocks and sectors.
Step 4
You can choose to set up SIP or invest lump sum in Global Index Funds.
Step 5
Specify the amount you wish to invest, whether as a SIP or a lump sum.
Step 6
Arrange your payment method. For SIPs, set up an auto-debit with your bank or UPI. For a lump sum, you can use UPI, net banking, or other bank transfer methods like NEFT or RTGS.
Frequently Asked Questions
Even though debt investment in index funds can be a rare case, it is not impossible. However, global index funds can have debt investments mostly that are based on hybrid indices. This means schemes that have both debt allocations and equity allocations as parts of their investment strategies.
No, global index funds do not provide assured returns like traditional bank fixed deposits or recurring deposits. This is because index funds work by replicating the performance of benchmarks, which mostly depend on market-linked instruments such as equity stocks.
The necessary period of time one needs to invest depends on the type of index your scheme is tracking. If the index scheme you have invested in tracks an index that is equity-oriented, you need to invest for a minimum of five years. This long-term investment will provide your investment with sufficient chances to grow.
Some of the factors that can provide higher returns across assets include the following:
- Volatility
- Market growth
- Company size
- Momentum
- Past performances
- Value
Investors must remember that each of the factors mentioned above can perform differently in different business cycles, having their specific areas of risk. You may target any one of the factors by buying into a factor index.
Since global index funds are a diversified scheme, they track portfolios that are composed of many stocks. Hence they can benefit from the positive effects of such diversifications by minimising the risks. Therefore, while an individual stock can experience loss when the share prices drop, a smaller component of a larger index will not be as damaging as the former one.
Global index funds tend to have very low annual fees. Since these work on a passive approach, the fund managers do not have direct control over the investment planning. Hence, these have low management fees. Besides, as per the latest data for the year 2022, the average fee of an index fund can be around 0.4%. It is a low-cost fund fee as compared to an actively managed fund, which can be around 0.66%
In most cases, index funds do not need to pay dividends. However, in a global market, even if these pay dividends, investors can be assured that the frequency may not be very consistent.
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