In case of stock markets while some prefer to invest themselves as they are proficient enough to manage risk as well as return associated with stock market but there are many people who do want to take the risk themselves as they have limited knowledge about stock market and that is where offshore funds and mutual funds come into play because both of these instruments invests funds into stock market on the part of the investors, however, there are many differences between the two. Let’s look at some of the differences between offshore funds and mutual funds –
Offshore Funds VS Mutual Funds
Meaning
Offshore fund refers to those funds which invest the funds of the investors in other markets or in simple words offshore funds do not invest money in the market in which they are domiciled whereas mutual funds refers to those funds which invest the funds of the investors in the country in which mutual funds refers to those funds which pool money from various investors within the country to invest the money into the financial markets of the same country in which mutual funds are domiciled.
Number of Investors
In case of an offshore fund, the number of investors investing funds in offshore funds is less because only a few people have knowledge as well as risk appetite of investing funds in the offshore funds whereas as far mutual funds are concerned the number of people investing funds into mutual funds is large. In simple words offshore funds can be compared to a private party, just like in private party only a few people are invited in the same offshore funds is for selected individuals only whereas mutual funds are like trade fair where everyone is invited.
Amount of Investment
In the case of offshore the amount of investment made by each investor is large whereas in case of mutual funds the amount of investment made by each investor is small. In simple words in case of offshore funds believe in quality over quantity and that is the reason why they can garner a huge amount of money from a small group of investors whereas mutual funds believe in quantity over quality as they garner a small amount of money from a large number of investors.
Risk
In case of offshore funds the risk is higher because apart from normal market risk there is additional country as well as currency risk as these funds are investing the money in international markets but in case of mutual funds country and currency risk is not there as mutual funds are investing the amount in domestic markets only.
Regulatory Requirement and Taxation
In case of offshore funds, there are fewer regulations besides they also have the tax advantage as the majority of offshore funds company are located in tax havens nations which is not the case with mutual funds as they have strict regulations besides one has to pay tax on the income from mutual funds.
As one can see from the above that there are many differences between offshore funds and mutual funds and that is the reason why any investor thinking of doing investment through both of these instruments should carefully read above points and then decide which investment is best suited for the investor.