International Mutual Funds: High-Potential Global Funds to Watch

It is a bright sunny morning. You are sipping a hot cup of tea, turning the pages of the newspaper. Suddenly, a few news items grab your attention. A US tech firm posts robust growth, multiplying its investors’ wealth by several notches. A German auto major records outstanding growth and rewards its investors by multiplying their wealth over time. You feel, what if you could invest in these companies from India hassle-free?

Cheer up. For you and others who wish to add a slice of international investing to their portfolios, international mutual funds can be a prudent option. So, what are these funds, and which international mutual funds deserve your attention? Let us find out.

Types of International Mutual Funds

There are various types of international mutual funds that you can choose to invest in. Some of them are:

Region-Specific Funds

As the name suggests, these funds invest in only one region or country. They provide you with targeted exposure to the strengths of that market. That said, they also concentrate your risk to that country or region.

Global Diversified Funds

These funds spread investments across multiple regions. As they do so, their performance becomes less dependent on a single country or region.

Feeder Funds

In such funds, an Indian mutual fund invests in a well-established offshore fund. These are denominated in INR, not USD. They are subject to the RBI’s Liberalised Remittance Scheme (LRS) limits indirectly. However, in such funds, expenses can quickly add up, and you should evaluate both fund fundamentals.

Advantages of International Mutual Funds

Investing in international mutual funds offers multiple benefits. Some of them are as follows:

Diversification Across Geographies

Different countries grow at different speeds. When one economy is slowing down, another might be doing well. For example, the US market may rise even as Indian markets move sideways. Europe, Japan, or emerging markets can also perform differently at the same time. Think of it like this. If it is raining in one city, it doesn’t mean it is raining everywhere.

International mutual fund investments help you benefit from the growth of economies across nations. Having money invested in multiple geographies reduces the impact of a bad phase in any one country.

Exposure to Global Megatrends

Investing in international mutual funds gives you exposure to global megatrends. Often, these are unavailable or underrepresented in domestic markets. These funds allow you to participate in long-term themes. These could be artificial intelligence, clean energy, advanced healthcare and digital transformation.

Currency Diversification

When you invest only in Indian assets, all your money is tied to the rupee. If the rupee weakens, the value of your investments can take a hit. This can happen even if the companies are doing fine. International mutual funds help reduce this risk.

These funds invest in companies outside India that earn income in foreign currencies such as the US dollar, euro, or yen. So, when those currencies strengthen against the rupee, your investment value can rise.

Long-Term Wealth Creation

One of the biggest reasons people look at international mutual funds is long-term wealth creation. Not quick gains. Not an overnight success. Just steady growth over time. Many global companies have been around for decades.

They sell products used worldwide. They earn in multiple currencies and operate across countries. As these businesses grow year after year, the value of your investment can slowly rise with them.

Risks to Consider

There are certain risks you need to consider before investing in international mutual funds. These include:

Global Markets Can Be Quite Volatile

International markets often react sharply to global events. Political tensions, wars, changes in government policies or sudden economic news can significantly affect markets.

What feels like a small event in another country can have a big impact on your investment. These ups and downs may be sharper than you can think. In the short term, this can be stressful.

Currency Fluctuations Can Affect Returns

When you invest in an international mutual fund, your money gets invested in a foreign currency. This means your returns will depend largely on currency movements. If the rupee weakens against the foreign currency, you may benefit. But if the rupee strengthens, your returns can reduce. This can happen even if the fund has done well. Also, currency movement is unpredictable. It can work for you or against you.

Limited Control

Most investors are familiar with Indian companies and the Indian economy. International markets are a different story.

You may not fully understand the businesses, consumer behaviour, or economic conditions of foreign countries. This makes it harder to judge whether a fund is taking sensible risks or not. Investing in something you don’t completely understand can feel uncomfortable, especially during market downturns.

How to Invest in International Mutual Funds?

Investing in an international mutual fund is easy. You can invest in the best international mutual funds directly through the website of the fund house, your broker’s platform, or any third-party investment platform. Several fund houses offer international mutual funds. To invest:

Complete your KYC

If you are a first-time investor, it is essential to complete your KYC. You can do it online or offline in a few simple steps by providing your identity and address documents, such as a PAN card, Aadhaar card, or passport.

Choose the Fund

Choose the fund you want to invest in. Look at the fund’s fundamentals and long-term returns. Check how the fund has performed across market cycles.

Invest via SIP or Lumpsum

You can invest through a systematic investment plan (SIP) or a lump sum. In the former, you invest a particular amount at pre-defined intervals by setting up an investment mandate. In the latter, you invest a large amount at one go.

Investment Through Gift City Mutual Funds

There is another way to invest in international mutual funds: Gift City. Gift City allows you to invest in dollar-denominated mutual funds. You can invest in passive fund-of-funds that track indices like the S&P 500 and the Nasdaq 100.

If you want to invest in Gift City-based mutual funds, you need to open an account with an IFSCA-regulated fund platform or distributor. After this, you need to complete KYC and then invest in a dollar-denominated fund of funds.

Conclusion

Investing in an international mutual fund lets you diversify your investment. It also allows you to take advantage of growing economies. That said, it is vital for you to align your investment with broader investment goals and risk tolerance. Also, ensure not to overdiversify and invest in funds with similar holdings.

Sources:

Moneycontrol
Kotak Securities
Value Research