Should You Invest In US-Focused Fund?—Here’s How to Take Advantage of Rupee Depreciation

The Indian Rupee depreciation is one such good investment opportunity.

It is a known fact that the Indian Rupee is depreciating and will continue to depreciate.

As an investor, how can you take advantage of this fact?

In this article, we’ll discuss how you can take advantage of rupee depreciation for your benefit and where to invest to get the best out of it.

Table of Contents:

1. Investing in Rupee Depreciation
2. Why International Mutual Funds?
3. Choosing the Best International Fund
4. A Final Compelling Benefit
5. Final Word

1. Investing in Rupee Depreciation

Even though there are different choices to invest to benefit from the rupee depreciation, not all of them are your safe choices.

But the safest and the best choice is by investing in international mutual funds.

Invest in an international mutual fund scheme that predominantly invests in the US market.

These international US-focused mutual fund schemes invest in high-quality stocks of the US companies that have good growth potential. As these companies grow and the rupee depreciates, your investments will fetch you the best returns in the long-term.

2. Why International Mutual Funds?

You might be wondering why you should invest in international mutual funds without even considering other options.

Other than International Mutual Funds, the other option available to an investor to benefit from rupee depreciation is Forex trading.

However, Forex trading by definition is not an investment option.

It is only a trading instrument where you trade your one currency to buy a different currency from another trader.

No new wealth is generated and either of the two traders always loses money all the time in Forex trading. They are extremely risky since the currency market is extremely volatile.

It is not the best option to go for if you are looking for long term wealth creation with control over your financial stability.

Hence the International Mutual Funds lies in the sweet-spot of relatively lower volatility, higher transparency, and rupee depreciation benefit.

Now that we have our route of investment clear, the final thing you should look at is which is the best international fund to invest in.

3. Choosing the Best International Fund

There is a wide range of Mutual Fund Schemes offered by the AMCs under the Equity: International category in India.

Not surprisingly, most of them invest predominantly in the US market.

But ultimately it all boils down to how you’ll choose any other Mutual Fund Scheme to invest, even though the category and the workings on the inside change.

Mutual Fund investments in general are long-term investments. Since we are aiming for the better out of the rupee depreciation—which also happens over long-term—the fund you invest must have a good track record over the long-term with investments in high quality US stocks.

See the table below:

Among a list of Mutual Fund schemes that invest in the US market, these funds have proven their mettle in the long-term while also fetching above-average returns to the investors.

4. A Final Compelling Benefit

Among the benefits of investing in international funds, one exceptional benefit is the diversification.

Investing in the International funds adds a whole new dimension to your portfolio. These investment funds are practically isolated from the volatility in the Indian Stock Market.

For example: In the past 1 year, the Indian market scene was not attractive or favourable to the investors, to say the least. There were too many talks about “economic slowdown” before the coronavirus crash gave the final blow.

The returns earned in the past 1 year, even by the best equity mutual fund schemes are not great or appreciable. And it will take a while to recover from this coronavirus crash.

Meanwhile, if you look at the table above, under the 1 year annualized return, you can see that these US-focused mutual funds have given better returns.

Although, you should note that it does not mean that they are not volatile. All the Equity investments are volatile. But if you have a US-focused mutual fund scheme in your portfolio, the impact of the volatility of the Indian market will be considerably less.

Any international fund can give you this level of diversification to your portfolio. However, you should also consider the investment return. Since the US is an economic powerhouse and as discussed before gives you the rupee depreciation benefit, investing in the US focused international mutual fund schemes are your best choice as an investor.

Final Word

Exposure to international market may appear to be a complication in the beginning.

But the mutual funds have been successful in keeping it simple while also making the international funds a diversification reinforcement to the investor’s portfolio.

The US-focused international funds in particular is a culmination of this diversity factor along with the rupee depreciation benefit and a doorway to a powerful yet reliable economy. As far as international funds are considered, they are in the sweet-spot as the right investment choice.

Choose a US-focused fund that is right for your financial goals and your portfolio, and take advantage of the opportunity they bring along.

If you need any assistance in choosing the right mutual fund scheme for your portfolio or even a comprehensive financial plan, reach out to us anytime.

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