The Facebook logo is displayed at the Nasdaq MarketSite in New York, U.S. (Photographer: Scott Eells/Bloomberg)

#BQMutualFundShow: You Too Can Own Facebook Or Amazon


This Week’s Show In A Nutshell

Geographical diversity can help mitigate risk but is still vulnerable to asset class risk.

The Key Takeaways

The idea of the theme chosen, geographical diversification, was to examine how beneficial it is to invest in funds which invest in stocks overseas. The other option, of investing in funds which invest in global mutual funds, was discussed as well.

Why did we choose this topic? The reasons are in the chart below.

#BQMutualFundShow: You Too Can Own Facebook Or Amazon

It shows that different geographies have given varied returns over different periods of time. We also tried to calculate the kind of gains that Google (Alphabet Inc), Facebook, Tesla Motors or Amazon have clocked in over the last ten years. They are exceptional. Amazon has multiplied wealth by over 18 times in the last 10 years. Tesla is the biggest rage in auto companies.

Sitting here in India, many would like to invest in these companies, but find the process of opening an account – which allows one to directly buy stocks of other countries – very expensive, at least optically. One place which offered such an option mentioned to me that each trade will incur a minimum brokerage of Rs 900.

So the question that arises is whether there is an option available to Indian citizens to invest in these companies. The answer is... Yes.

One of the experts on this week’s The Mutual Fund Show was Rajeev Thakkar, the chief investment officer of PPFAS, a fund house that offers only one scheme to its clients - which invests in companies in India, the United States, and western Europe. The fund owns stocks such as Alphabet, Facebook, and a few others. The other expert, Rohit Shah of Getting You Rich, a financial advisor, also mentioned some other fund schemes – like the Franklin India Feeder Franklin U.S. Opportunities Fund and the Motilal Oswal MOST Shares Nasdaq 100 ETF – that invest in global companies and/or funds which invest in global companies. The issue is that the returns from these funds don’t set your heart racing.

#BQMutualFundShow: You Too Can Own Facebook Or Amazon

As seen above, other than the MOST Shares Nasdaq ETF, the others haven’t really set the stage on fire. The Parag Parikh Long Term Value Fund’s 3-year compound annual growth rate is at 13.6 percent. So if you do invest in geographical diversification, reduce your return expectations.

During the show, there was a divergence of opinion on the topic of who should invest in such funds. Rajeev suggested that a fund that invests in other geographies is very good for a first-timer as well, but according to Rohit, India is an engine of growth, and only those investors who have enough exposure to Indian equities should aspire for such schemes. You can take your pick.

Niraj Shah is Markets Editor at BloombergQuint.