In today’s dynamic investment environment, diversification has become an essential strategy for savvy investors seeking to optimize risk and maximize potential returns.
International mutual funds are good options for investors to diversify their portfolios and get exposure to global markets.
This article talks about valuable insights and knowledge on international mutual funds. So, keep reading to learn more.
What are International Mutual Funds
Mutual funds specially designed to target the international market are called international mutual funds.
These funds primarily focus on investing in securities of companies based outside of the investor’s home country.
Top International Funds In India 2023
Based on past performances, here is a short list of top international funds in India in 2023.
- ICICI Prudential US Bluechip Equity Fund
- Motilal Oswal Nasdaq 100 FoF
- Invesco India – Invesco Pan European Equity FoF
- Aditya Birla Sun Life International Equity Fund
- Edelweiss US Value Equity Offshore Fund
- DSP US Flexible Equity Fund
- Edelweiss US Technology Equity FoF
International Vs Global Mutual Funds
Even though both of these funds offer exposure to international markets, they differ from each other a little bit.
International Mutual Funds: As the name suggests, these funds invest in markets outside the investor’s home country focusing on specific regions or countries such as Europe, the USA or emerging economies.
Global Mutual Funds: Global mutual funds invest in securities of companies worldwide including domestic & foreign companies.
Benefits of International Mutual Funds
International mutual funds come with a number of benefits for their investors. Some of the common benefits are discussed below.
1. Exposure to International Markets
Obviously, international mutual funds are designed to get exposure to global markets. It enables investors to leverage the opportunities outside their home country.
Diversification is a good way of reducing the risks & increasing the potential for good returns. International mutual funds offer investors to further diversify their investments by investing in different regions of the world.
3. Access to Emerging Markets
There are 195 economies in the world. Several of them are classified as emerging markets, international mutual funds may help us access these markets and leverage benefits.
4. Currency Diversification
Yes, international mutual funds offer currency diversification. This way investors may gain extra income if the specific currency strengthens against the investor’s home currency.
Risks Associated With International Mutual Funds
An investment vehicle with the potential for higher returns can’t escape associated risks. hence, international mutual funds bring some risks.
1. Currency Risks
Being invested in international markets, investors’ money is exposed to currency risks. A little fluctuation in currency exchange rates can impact the value of investments & returns as well.
2. Country-Specific Risks
Different countries may have country-specific factors impacting the economy. These factors can act as risks for foreign investors.
3. Liquidity Risks
Some international markets offer lower liquidity. This can impact the ability to buy or sell securities at desired prices and periods.
Related Read: Risk-free investment: GILT Funds
Alternatives to International Mutual Funds
International mutual funds are not the only way to get exposure to global or country-specific markets. Some other popular ways are also available.
- Exchange Traded Funds (ETFs): Various ETFs track specific international indices or focus on particular regions, sectors, or themes. They can provide exposure to international markets through a single investment vehicle.
- Foreign Investing: With an overseas trading or brokerage account, investors can directly trade international stocks.
Related Read: How to Invest in USA Stocks from India
Things to Consider Before Investing
Well, investors must consider some important factors before investing in international mutual funds.
- Asset Management Company & Its Reputation
- Investor’s Investment Objective
- Fund Selection
- Fund Manager’s Experience & Expertise
- Associated Risks
- Past Performance
- Costs & Expense Ratios
Apart from this, you should start small & don’t panic about short-term volatility.
How To Invest In An International Mutual fund
Thanks to online investing platforms that made investing easy. Investing in an international mutual fund is only a few steps away.
- Register with any reputed online investment platform
- Open an account & complete KYC
- Research & select fund
- Choose the mode of investment i.e. lumpsum or SIP Investment
- Make the payment
- Review the performance periodically
This article is written for educational purposes and should not be considered investment advice. Readers should use their own intellect before making any financial decision.
Can I redeem my investment in international mutual funds at any time?
Yes, most international mutual funds are open-ended. It means investors can redeem them at any point in time. However, they should be aware of the redemption rules and charges.
What are the costs associated with investing in international mutual funds?
Costs include expense ratios, transaction fees, redemption fees, and potential currency conversion costs. Understand and compare the fees associated with different funds before making investment decisions.