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Investing in international funds can be a good way to expand your investments beyond your home country, offering chances to grow your money in global markets. However, it also comes with its own set of opportunities and risks.

Advantages of International Funds:

1. Currency Benefits: By investing in foreign currencies, you can benefit if those currencies rise against your home currency, adding extra value to your investments.
2. Diversification: Investing in international funds helps spread your money across different countries, lowering risk and potentially boosting returns by tapping into global market growth.
3. Growth Potential: Some foreign markets, especially in developing countries, may offer faster growth than stable, developed economies. This could mean higher returns on your investments.

Disadvantages of International Funds:

1. Currency Risk: Changes in exchange rates can hurt your returns. Your investment might lose value if a foreign currency falls in value compared to your own.
2. Political and Economic Risk: Markets in other countries can be affected by unstable politics, economic downturns, or policy changes, making these investments riskier.
3. Higher Fees: International funds often come with higher costs for managing and trading due to the complexities of investing in foreign markets, which can eat into your profits.

International funds are ideal for investors seeking portfolio diversification and exposure to global markets. They suit those with a higher risk tolerance, as international markets can be volatile. Investors looking for growth opportunities in emerging markets may benefit from these funds. International funds can offer substantial returns if you have a long-term horizon and can handle market fluctuations. These funds are also great for tapping into global trends that are not available domestically. However, they may not be suitable for conservative investors or those with low-risk tolerance.

Investing in international funds offers excellent opportunities for growth and diversification but also comes with risks, such as currency fluctuations and political instability. Working with an AMFI-registered mutual fund distributor or advisor can be highly beneficial when considering such investments. Advisors have the expertise to help you select the right funds for your goals, provide insights on market trends, and ensure your investments are appropriately managed. Their advice can help you avoid mistakes and make informed decisions. For a more personalized approach and tailored strategy, seeking professional help from a financial advisor is always wise.

Here’s a comparison between Capital Protection Funds (CPFs) and Conservative Hybrid Funds:

In summary, CPFs are more focused on protecting capital with minimal risk. At the same time, Conservative Hybrid Funds aim for moderate returns through a combination of equity and debt, offering a balance between safety and growth. Both are suitable for conservative investors, but CPFs are more protective of the principal, whereas Conservative Hybrid Funds provide more growth potential. Choosing the right fund for your goals can be challenging, so the guidance of an AMFI-registered mutual fund distributor or advisor is essential.
They can help you assess your financial goals and risk tolerance and recommend funds that align with your needs. Seeking professional help ensures you make informed, well-considered investment decisions and avoid costly mistakes. A financial advisor can provide the necessary insights to ensure your investment strategy is on track.

International funds are equity funds that invest in stocks of companies listed outside of India. These funds help you invest in some of the biggest companies in the world. Investing in international funds from India offers exposure to global markets and diversification. Here are additional types of International Funds available in the Indian market:

1. Region-Specific Funds: These funds invest in assets across a specific region, such as Europe or Asia. They expose various markets within that region, helping investors benefit from regional growth opportunities.
2. Country-Specific Funds: These funds focus on one particular country’s markets, like the US or Japan. They offer more concentrated exposure to companies and sectors within that country.
3. Global Equity Funds: Invest in companies’ stocks worldwide, offering broad global market exposure.
4. Global Debt Funds: Invest in bonds from governments or companies in different countries, providing international fixed-income opportunities.
5. Emerging Market Funds: Focus on investing in developing economies like China or Brazil, offering higher growth potential but with more risk.
6. International Fund of Funds (FoF): These funds invest in other international mutual funds or ETFs, providing diverse exposure to various global assets or regions.
7. Global Real Estate Funds: Invest in international real estate for global property market exposure, including commercial properties and investment trusts (REITs).
8. Global Commodities Funds: Focus on investing in global commodities like gold, oil, or agricultural products, often used as hedges against inflation.
9. Sector-Specific International Funds: Invest in particular sectors, like technology or healthcare, on a global scale, aiming to capitalize on global industry trends.

Investing in international funds offers great diversification opportunities, but choosing the right funds can be complex. Considering risk tolerance, market trends, and financial goals before investing is essential. Professional guidance from an AMFI-registered mutual fund distributor or financial advisor can help you navigate these complexities. Advisors provide expert insights into global markets, helping you select funds that align with your investment objectives. They also simplify the decision-making process and ensure your investments are well-balanced. By seeking professional help, you can avoid costly mistakes and make confident, informed choices.

Capital Protection Funds (CPFs) are investment funds designed to protect your initial investment while offering modest returns. Unlike traditional mutual funds focusing on capital growth, CPFs aim to preserve your capital by investing most of the money in low-risk options like government and highly-rated corporate bonds. A small portion of the fund, typically 10-20%, is invested in stocks to offer growth potential.

These funds are usually closed-end, meaning you can’t redeem your investment before a fixed maturity date, typically between 1 to 5 years. Most of the fund’s assets are in safe, fixed-income securities, which helps protect your capital, while the equity portion allows modest returns. Although the equity part can help the fund grow, it’s not guaranteed, and the returns depend on the stock market performance.

Advantages:

• Capital protection: CPFs are designed to preserve your initial investment, making them a safer option for conservative investors.
• Better returns than fixed deposits: While FDs offer fixed returns, CPFs have the potential to provide higher returns because of the small exposure to equities.
• Suitable for conservative investors: These funds are ideal for retirees or those who want a steady income with lower risk.

Disadvantages:

• Returns are not guaranteed: Even though the fund is focused on protecting your capital, the equity portion still carries some risk.
• Limited Liquidity: Since CPFs are closed-end, your money is locked in for the entire investment period.
• Market Risk: The portion of the fund invested in equities can be affected by market fluctuations, which may impact overall returns.

Some capital protection funds examples are Sundaram Cap Protection 5 Years Series 8, SBI Capital Protection Oriented Fund – Series II etc.

Capital Protection Funds offer a good mix of safety and moderate growth, making them suitable for conservative investors. However, it’s essential to understand the risks involved. Seeking advice from an AMFI-registered mutual fund distributor can help you choose the right CPF for your needs. A distributor can guide you in making informed decisions and ensure your investments align with your financial goals.

FMPs (Fixed Maturity Plans) are debt mutual funds that invest in fixed-income instruments like bonds, government securities, and money market instruments. These funds have a fixed investment horizon, meaning they are designed to mature on a specific date, usually ranging from a few months to a few years.

Key Features of FMPs:

1. Fixed Maturity: FMPs are structured to mature after a predetermined period, making them less sensitive to interest rate changes compared to open-ended debt funds.
2. Investments in Debt Instruments: FMPs typically invest in bonds and other fixed-income securities with maturity dates matching the fund’s maturity. This ensures that the principal amount is repaid at maturity.
3. Low Risk: As FMPs primarily invest in debt securities, they tend to have a lower risk compared to equity funds, though there are still risks involved, such as credit risk and interest rate risk.
4. Lock-In Period: FMPs have a lock-in period, meaning you cannot redeem your investment before the fund’s maturity. Depending on the fund, this lock-in period can range from a few months to a few years.
5. Suitable for Conservative Investors: FMPs are ideal for investors looking for a stable, predictable return without taking much risk. They are often used by conservative investors seeking to match their investment horizon with the fund’s maturity.

Fixed Maturity Plans (FMPs) offer advantages like capital protection as they invest in fixed-income securities with matching maturities, ensuring safety. They provide stable returns known at the time of investment; however, FMPs come with limited liquidity as you cannot redeem them before maturity. They also carry market risks, including interest rate and credit risks, though these are lower than equities. Additionally, FMPs generally offer lower returns compared to equity or hybrid funds, as they prioritize stability and safety.

Fixed Maturity Plans (FMPs) are suitable for conservative investors seeking low-risk, fixed-income investments with predictable returns over a fixed period. They offer capital protection and stable returns, but they come with the limitations of a lock-in period and lower potential for higher returns than equities or hybrid funds. It’s essential to consult an AMFI-registered mutual fund distributor or advisor to ensure FMPs align with your financial goals and risk tolerance. They can help you navigate your investment options and recommend the best fit for your needs. Seeking professional help ensures you make informed decisions and avoid common mistakes in your investment journey.

Some Fixed Maturity Plans (FMPs) examples are Kotak FMP Series 305- 1200D, SBI Fixed Maturity Plan (FMP) – Series 72, Nippon India Fixed Horizon Fund XLI- Series 8 etc.

Investing in a Fund of Funds (FOF) can be a good option, but there are several factors to consider before deciding if it’s the right choice.

Advantages of FOFs:

1. Diversification: FOFs invest in other funds, offering exposure to different asset classes, sectors, or markets. This helps spread risk across different investments.
2. Professional Management: FOFs are managed by experienced professionals who select and monitor the underlying funds.
3. Convenience: By investing in a FOF, you can access multiple funds with just one investment, saving time and effort.
4. Access to Specialized Funds: FOFs may provide access to funds that are difficult to invest in directly, like hedge funds, private equity, or international funds.

Disadvantages of FOFs:

1. Higher Fees: FOFs generally have additional fees on top of the fees charged by the underlying funds, making them more expensive than investing directly in individual funds.
2. Complexity: The structure of FOFs can be more complex to understand since you’re essentially investing in a fund that invests in other funds.
3. Tracking Difficulty: Since FOFs hold multiple mutual funds, tracking individual stocks within those funds can be tedious. This can make it challenging to monitor exactly where your money is invested.
4. Limited Options: Many FOFs invest only in funds from their own fund house, limiting diversification and your options. A few FOFs invest in other fund houses’ schemes, but these options are less common.

Some Fund of funds examples are PGIM India Global Equity Opp Fund, Aditya Birla SL Financial Planning FOF Aggressive Plan etc

If you’re looking for diversification, professional management, and convenience, and you don’t mind the additional fees, a FOF could be a good fit. However, if you prefer more control over your investments, want to avoid extra costs, or need a more tax-efficient option, you might want to explore other choices. It’s advisable to consult an AMFI-registered mutual fund distributor or financial advisor to see if a FOF aligns with your goals. An advisor can help you choose the right funds based on your needs and risk tolerance, offering valuable insights and guidance throughout the investment process. Seeking professional help ensures you make informed decisions and avoid common mistakes.

In summary, Fixed Deposits (FDs) are ideal for conservative investors seeking guaranteed returns and low risk. At the same time, Fixed Maturity Plans (FMPs) offer higher return potential with moderate risk and no principal guarantee. Both are suitable for investors with a low-risk tolerance, but FMPs provide a better chance for growth with some market exposure.

Choosing the right investment option can be challenging, which is why seeking the guidance of an AMFI-registered mutual fund distributor or advisor is essential. They can help you assess your financial goals and recommend funds that suit your risk profile. Professional advice ensures that you make informed investment decisions and avoid common mistakes. A financial advisor can offer personalized insights, helping you build a portfolio that aligns with your objectives.

Gold has always been considered a valuable asset, and with modern investment tools, people can now invest in gold without buying physical gold. Today, they can choose from three primary options: Sovereign Gold Bonds (SGBs), Gold Exchange-Traded Funds (ETFs), and Gold Mutual Funds (MFs). Let’s explore each option to help you decide which best suits your investment needs.

Sovereign Gold Bonds (SGBs)
The Reserve Bank of India (RBI) issues government-backed Sovereign Gold Bonds (SGBs) and offers a fixed interest rate of 2.5% per annum, paid semi-annually. These bonds appreciate in value as gold prices rise because they are linked to the price of gold. One of the significant advantages of SGBs is their tax efficiency. If held to maturity, the capital gains are tax-free. However, SGBs come with an 8-year fixed tenure with a lock-in period of 5 years, and you can sell them in the secondary market only after this period. This makes SGBs suitable for long-term investors who are looking for stability and tax benefits.
Note: Currently, SGB is discountinued by Government.

Gold Exchange-Traded Funds (ETFs)
Gold ETFs trade on stock exchanges as open-ended funds, with each unit representing a specific amount of physical gold. They offer high liquidity, allowing investors to buy or sell them anytime during market hours, making them more flexible than SGBs. They provide a direct way to track the price of gold, with returns based on gold’s market fluctuations. They are ideal for investors who want exposure to gold but need flexibility in managing their investments.

Some Gold ETFs examples are SBI Gold ETF, Kotak Gold ETF, Quantum Gold Fund

Gold Mutual Funds (MFs)
Gold Mutual Funds invest in a diversified portfolio of gold-related assets, including shares of gold mining companies or physical gold. These funds pool money from multiple investors and are professionally managed. They are ideal for investors who want exposure to gold but do not have the expertise to manage investments themselves. The returns from Gold MFs depend not only on the price of gold but also on the performance of the underlying gold-related stocks. These funds may carry a moderate level of risk due to their exposure to the stock market.

Some Gold MFs examples are ICICI Prudential Regular Gold Savings (FOF) Fund, Nippon India Gold Savings Fund, Quantum Gold Savings Fund.

Comparison Table: SGBs, Gold ETFs, and Gold MFs

Taxation Rules for Gold Mutual Funds

Short-Term Capital Gains (STCG):

• Old Rule:
• Gains on units sold within 3 years were taxed as per income tax slab rates.
• New Rule:
• For units bought between April 1, 2023, and March 31, 2025, slab rates apply regardless of holding period.
• From April 1, 2025, units held for up to 2 years are STCG; gains for 2–3 years are LTCG.

Long-Term Capital Gains (LTCG):

• Old Rule:
• Units sold after 3 years were taxed at 20% with indexation (if bought before March 31, 2023).
• New Rule:
• For units bought between April 1, 2023, and March 31, 2025, gains are taxed at slab rates.
• For units bought after March 31, 2025, LTCG (2+ years) is taxed at 5% without indexation.

Conclusion:

• Sovereign Gold Bonds (SGB): Best for long-term investors, offering fixed interest, tax benefits, and government-backed security, but with a longer lock-in period.
• Gold ETFs: Easy to trade, low costs, but no interest and subject to market fluctuations.
• Gold Funds: Investors can buy Gold ETFs through mutual fund accounts, making them suitable for long-term investments.

SGBs are the best option if you are looking for a gold investment that provides extra benefits such as interest and tax efficiency.

A Fund of Funds (FOF) is like a big basket where people put their money. Instead of buying things like individual stocks or bonds, the basket buys other smaller baskets (which are different investment funds). The risk is spread out by having money in many different baskets, so if one basket doesn’t do well, the others might still do okay.

Types of Funds of Funds

There are different types of FOFs, depending on what you want to invest in:

1. Asset Allocator Funds: These invest in different types of things like stocks, bonds, and even things like gold to keep it balanced.
2. International FOFs: These invest in markets around the world, allowing you to participate in businesses in other countries.
3. ETF-based FOFs: These invest in a group of smaller funds called ETFs, which are already easy to buy and sell, helping spread the risk.
4. Gold FOFs: These focus only on gold, giving you a chance to invest in gold without buying it directly.

How FOFs Work

When you put your money in a FOF, the manager of the FOF decides which funds to pick. They choose funds based on how well they’ve done in the past and how safe they are. By putting your money in different funds, you get a mix of different investments, making it less risky than putting all your money in just one thing. For example, a fund like ICICI Prudential Debt Management Fund (FOF) invests in other funds that help reduce risk.

Advantages of Fund of Funds

1. Diversification: By investing in many funds, it helps spread out the risk.
2. Professional Management: Experts choose and manage the funds, which can help the investment grow.
3. Access to Special Funds: Some funds are hard to access on your own, but through FOFs, you can invest in special funds like private equity or hedge funds.
4. Convenience: Instead of managing lots of different investments, you can just invest in one FOF and still have a variety of investments.

Disadvantages of Fund of Funds

1. Higher Fees: FOFs charge fees to manage the basket, and the funds inside also have fees. This can lower the returns.
2. Lower Returns: Sometimes, having so many different funds can mean the FOF makes less money, especially if some of the funds aren’t doing well.
3. Less Control: You can’t choose the individual funds inside the FOF. You have to trust the manager to pick the best ones.
4. Complicated: It can be hard to understand precisely where your money is going because there are many funds inside the FOF.

Some Fund of Funds examples are ICICI Prudential Thematic Advantage Fund (FOF), Quantum Multi Asset Fund of Funds, Nippon India Nifty Next 50 Junior BeES FOF, Motilal Oswal Nasdaq 100 FOF etc.

Conclusion

A Fund of Funds is a good way to invest if you want to spread your money across different areas without managing everything yourself. However, knowing that it costs more and you have less control over it is essential. Before investing, consider whether it fits your goals.
A Fund of Funds is a smart option for simplified investing, but always seek advice from a trusted mutual fund distributor for the best results.

Gold ETFs are mutual funds that invest in physical gold and track its market price. Unlike physical gold, Gold ETFs are traded on stock exchanges like stocks, which means you can buy and sell them quickly. The most significant advantage of Gold ETFs is that they are cost-effective and transparent. With Gold ETFs, you don’t have to worry about handling physical gold, storage, or theft.

One of the key benefits of Gold ETFs is their liquidity. This means you can buy and sell them quickly, just like any other stock, at prices that reflect the current market value of gold. Unlike physical gold, where prices vary depending on the dealer, Gold ETFs have a uniform price. They also come with low expense ratios (around 0.5-1%) and minimal transaction fees. These funds offer good returns, with some, like ICICI Prudential Gold ETF, giving a return of about 21.58% in the last year.

Challenges with Physical Gold

While physical gold remains a popular choice in India, it comes with its own set of challenges. When you buy physical gold, you need to worry about authentication, insurance, storage, and theft risks. Additionally, buying gold jewellery involves high making charges (10-30%), which can reduce the value of your investment. Moreover, the resale value of physical gold is often lower than its purchase price due to price cuts.

In contrast, Gold ETFs offer security and convenience. Unlike physical gold, you don’t need to store them in a locker, and they can’t be stolen. Wealth tax is applicable on gold purchases exceeding ₹30 lakh, but it does not apply to investments in gold ETFs.

Which One Should You Choose?

Gold ETFs are ideal for investors who want a modern and hassle-free way to invest in gold. They are easy to trade, cost-effective, and offer good returns. On the other hand, physical gold may appeal to those who prefer owning gold in its tangible form for emotional or cultural reasons. However, it’s important to remember that physical gold comes with additional costs and risks.

Experts suggest investing a portion of your portfolio in gold ETFs (around 5-10%) to protect against market volatility and inflation. Gold has historically been a safe investment during uncertain times, and Gold ETFs provide a great way to tap into this asset class.

Gold ETFs vs. Physical Gold:

Key Features of Gold ETFs:

1. Gold ETFs are one of India’s most popular types.
2. There is no lock-in period; you can redeem your investment at any time.
3. Gold ETFs are taxed like debt funds (based on your income tax slab if invested after April 2023).

Short-Term Capital Gains (STCG) on Gold ETFs

Old Rule: Before Budget 2024, the holding period for STCG on gold ETFs was three years. Gains from units sold within three years were added to taxable income and taxed at the applicable slab rate.

New Rule: For ETFs purchased between April 1, 2023, and March 31, 2025, gains will be added to taxable income and taxed at slab rates, regardless of the holding period.

The holding period for STCG will be reduced from the next financial year. For ETFs purchased after March 31, 2025, and sold within 12 months, gains will also be taxed at the slab rate.

Long-Term Capital Gains (LTCG) on Gold ETFs

Old Rule: For gold ETFs bought before March 31, 2023, and held for over 3 years, a 20% tax with indexation applied.

For ETFs bought after April 1, 2023, gains were taxed as per the investor’s income tax slab.

New Rule: ETFs purchased between April 1, 2023, and March 31, 2025, will have gains added to taxable income and taxed at slab rates, no matter how long they are held.

For ETFs bought after March 31, 2025, and sold after 12 months, gains will be taxed at 12.5% without indexation benefits.

The holding period for LTCG qualification is now 12 months, reduced from 36 months.

These ETFs mainly invest in physical gold (90-100%) and a small portion in debt instruments to manage redemptions.

Some Gold ETFs are Axis Gold ETF, HDFC Gold ETF, SBI Gold ETF, Kotak Gold ETF

Conclusion: Gold ETFs offer a modern, liquid, and cost-effective way to invest in gold. They have fewer risks and fees than physical gold, making them ideal for investors seeking a more straightforward, hassle-free investment. Physical gold remains a good option for those who value owning a tangible asset, but it comes with higher costs and risks. (Details as on 1^st Sep 2024)