Funds to invest abroad: what are they and how do they work?

Learn more about funds for investing abroad and their main features

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The economic and political uncertainties that accompany the year 2022 are causing many Brazilians to start taking an interest in funds to invest abroad.

However, for many investors, it can be a little difficult to choose between the options offered by the international market.

And if you want to take advantage of the best that is abroad, investment funds can be interesting alternatives for your portfolio.

With that in mind, in today's article, we'll explain how it works. this financial product and its main features. Enjoy reading!

What are investment funds?

Before knowing which are the best funds to invest abroad, it is necessary to know how this type of financial product works.

The funds are basically a kind of “condominium” of investors.

This means that they pool resources from multiple investors and delegate decisions to a professional manager.

Investors’ resources form the fund’s assets.

To diversify the portfolio, increase earning opportunities and dilute risks, it is very common for investors to invest in different funds, with different objectives and risks.

The manager is the professional who decides which investments will be made with the money invested by investors. Therefore, he or she is the one who will choose which financial assets will be acquired or sold, in what quantity and for what price.

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What are funds for investing abroad?

International funds are investment funds abroad whose income is linked to foreign currencies.

In other words, they are a collective investment modality, which allows investors to have access to the results of international investments.

Investing in international assets works in a very similar way to investing in funds from other categories.

International funds can be fixed income funds, variable income funds or currency funds. Learn more about each of them:

• Fixed income: Most of the assets are invested in fixed income from other countries. Among the most commonly found assets are government bonds and debentures from foreign companies.

• Variable income: have an investment strategy that prioritizes international assets with good chances of gains. On the other hand, the risks involved are also a little higher.

• Exchange fund: It is a type of fund that makes investments based on foreign currencies. Typically, those who choose this fund are the most daring investors.

How does an international investment fund work?

Overseas investment funds work in a similar way to traditional funds.

However, in this case, the assets are allocated to the foreign market.

Regarding asset selection, this process is the responsibility of a specialized manager, who is the professional responsible for implementing the fund's strategy.

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How to invest in international funds?

International funds are indicators for moderate or bold investors, who are willing to take certain risks in exchange for good financial returns.

Brazil already has stockbrokers that make this asset available to investors (there are funds in dollars and reais).

To get started, you must open an account with a stockbroker. On the investment platform, you will find shares in international funds.

After purchasing the desired amount of shares, it is important that you start monitoring the results of your portfolio with a certain frequency.

To choose a good broker, you need to check the certifications, analyze the company's reputation and also the fees charged.

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What are the main characteristics of funds for investing abroad?

Now that you know what funds are for investing abroad, you need to know their main characteristics. Take a look:

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Fees

Before making any type of investment in funds, it is very important that you know all the fees charged.

The vast majority of investment funds charge fees to compensate the administration and manager.

The fund administration fee is an amount paid by all fund shareholders. Basically, it is the remuneration paid for the administration and management service. In other words, it remunerates the professionals and companies involved in the fund.

A performance fee may also be charged. This fee is actually charged on the portion of the fund's profitability that exceeds the variation of a previously determined performance index.

Therefore, we can say that it is a type of reward.

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Minimum initial application

The minimum initial investment, as the name suggests, is the minimum amount to start investing in a fund.

It is important to remember that this value varies from fund to fund.

While some have a more accessible initial minimum value, others require larger contributions.

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What are the main risks of investing abroad?

Although this type of investment can bring good returns, it is important to remember that, just like in the Brazilian market, investments abroad are exposed to the risks of that country.

After all, there is no investment that is completely risk-free, especially when we are talking about variable income assets.

This means that before you start thinking about investing abroad, it is important to create a risk management and diversification strategy, so that you can dilute the risks.

In general, variable income funds present relatively greater risks than fixed income funds, as they are more exposed to market volatility.

One of the main risks is exchange rate fluctuations. In other words, assets quoted in foreign currencies are subject to exchange rate fluctuations.

In addition, market risk also needs to be considered.

This risk is related to the fluctuations that a given asset may experience over time.

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Conclusion

Now you know what funds are for investing abroad and the best options for your portfolio.

Before you start investing in funds, regardless of the category, it is important that you understand your investor profile very well, define investor objectives and, of course, study the desired fund.

This way, you can better deal with the risks involved and find the best opportunities in the market!