Investing in global funds is a way of diversifying your investment portfolio. But you need to be aware of the risks involved when going forward with this investment. This way you can make an informed decision on which funds to invest in.
There are many boutique fund managers that will offer you investment opportunities. You need to think about all the economic risks you may run into regarding the country that you have decided to invest. Another concern is the currency risk. Depending on the national policies and regulations of the national central bank of the country, the national currency is subjected to appreciation or depreciation. This can go either way and if you invest wisely, you can magnify your gain from the investment. But you need to look at the current economic, social and political condition of the country before jumping to conclusions. It is not just the current conditions you need to be well versed in; you should have an eye for the future of the country as well.
Investing in global funds can be affected by the nature of the securities market and the process of how transactions occur in the country. You need to have a good understanding of the regulations of the country as this may pose an impediment. The geopolitical environment, as mentioned before, has a high effect on the investment conditions of the country. You need to familiarize yourself with the political stance and environment of the country as well as the countries that it is adjacent to which can have an effect on the national political environment. The policies taken by the political party at present can affect the success of the global fund.
Once you are aware of all the risks and you have done all the research regarding the country’s economic environment, you can then look at where you are going to buy global funds. This decision should be influenced by the success rate of the underlying investment. There is nothing riskier than investing in a fund without having all the information as this can endanger your financial situation. The diversification of global funds is a factor that you need to think about. It is a risk when the global fund concentrates on a certain sector only in the selected country.
You will find global funds that cover emerging markets in regions or have particular exposure to specific markets in the Asian region. But you need to look at the overall composition of where the total of the assets is concentrated in. If you are investing in a fund that focuses on an emerging market but find that it is mostly concentrated on one country, it can be a poor investment decision. So diversification of a global fund allows you to spread out your risk. There are certain expenses that you need to think about as well. These will include the exit load and expense ratio charges of the funds when it comes to the Fund of Funds scheme.
