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International Mutual Funds: What are International Mutual Funds?


this article international mutual funds will outline everything you need to know about It is also known by alternate names, overseas funds or foreign funds. An international mutual funds invests in equity and debt stocks in international markets.

To understand what international mutual funds are, let us take an in-depth look at the types of international mutual funds, features of international mutual funds, who is best suited to invest in international mutual funds and how you can invest in international mutual funds. Can

Any financial advisor would advise you to maintain a diversified portfolio. This means that you need to invest through lots of investment options – and a healthy way to maintain a diversified portfolio is to have a portfolio with diversification across different economies.

Also read these posts related to mutual funds.

What are International Mutual Funds?

International Mutual Funds are those, which invest primarily in equity, equity related instruments and debt securities of companies/entities listed outside India. Many of these funds are actually fund of funds schemes, with their underlying foreign funds investing in foreign markets.

Types of International Mutual Funds


Global Funds

Global Funds are a type of international mutual fund that allows investors from all countries to invest, including investors from their home country.

Regional Funds

Regional Funds, as the name suggests, depend on the geographical area. For example, if you invest abroad with a focus on a particular geographic region, it may count as a local fund. Some investors focus on buying multiple regional funds rather than global funds.

country funds

When an investor invests in a fund that is available only in a foreign country and nowhere else, it is called a country fund. Since the data is not spread across different countries, it is one of the easiest funds to invest in internationally.

Global Sector Funds

Global Sector Funds Funds focus on a specific sector of the economy in other countries. This works well for investors who want to invest in a specific sector.

ये भी पढ़ें: म्यूच्यूअल फंड कितने प्रकार के हैं | Types Of Mutual Funds

Features of International Mutual Funds


diversification

As we mentioned earlier, diversification is the key to a good investment portfolio, and that is what is offered by an international mutual fund. The portfolio is not restricted to the markets in India and gives investors access to a wide variety of financial instruments across the world.

Exposure to different economies

When you invest internationally, your mutual fund will invest in financial instruments from around the world. This means that you can take advantage of the benefits from different economies. Investing in all economies allows the investor to reduce risk and ensure minimal losses in times of volatility.

risk exposure

While an international mutual fund offers higher returns due to a diversified portfolio and investments through different financial instruments, the risk involved is higher. This is because foreign markets face political, global and economic risks that can affect investment results.

professional management

If you are a novice investor, it will be difficult for you to assess the markets in your own country, let alone the situation in the markets abroad. But when you invest in an international mutual fund, a fund manager will be able to help you invest in the right places with the help of exhaustive data, technical knowledge and experience over the years in investing in international funds.

List of 10 Best International Funds for 2021

Fund Name Returns (%)
1 year 3 years 5 years 7 years 10 years
DSP Global Allocation Fund 29.98 13.85 10.54 , ,
Edelweiss Greater China
Equity Off-shore Fund
63.34 26.89 25.35 18.69 16.18
Nippon India US
Equity Opportunities Fund
47.98 24.23 19.79 , ,
ICICI Prudential US
Bluechip Equity Fund
40.02 22.66 17.98 15.39 ,
DSP US Flexible Equity Fund 53.83 20.53 18.19 15.10 ,
Aditya Birla
International Equity Fund -Plan A
38.83 16.48 13.40 9.91 11.49
Edelweiss Emerging
Markets Opportunities Fund
51.74 13.81 16.09 , ,
HSBC Global
Consumer Opportunities Fund
41.86 13.62 14.67 , ,
Franklin Asian Equity Fund 50.59 13.98 15.75 12.31 11.08
Kotak Global Emerging
market fund
59.48 12.09 13.62 7.95 8.59
benchmark(S&P BSE 100 TRI) 64.91 10.94 14.67 14.27 11.57
(Data as on 27th April 2021, Source: Value Research)

Who should invest in International Mutual Funds?

You should invest in an International Mutual Fund if you are one of the following investors –
Investors looking for a diversified investment portfolio not only in the domestic market but also in the international market should consider investing in international mutual funds.

But a good financial advisor will tell you that you should never exceed 15% of their total investment portfolio.

  • Investors seeking geographic diversification to reduce the risk of their overall equity portfolio
  • Investors seeking to hedge against rupee depreciation, especially those creating funds for overseas education or travel
  • Investors with high risk and long term investments of at least 5 years with overseas economies
  • Investors who are comfortable with significant volatility in their investment value
  • Investors are comfortable with the additional political, market and economic risks associated with overseas markets

Investors who have the time to study international markets and have a working knowledge of financial instruments and the factors that affect them should consider investing in international mutual funds.

Investors with a high risk appetite can consider investing in international mutual funds as there is risk involved when investing in international markets (which invest primarily in equities.

How to Invest in International Mutual Funds?

If you are interested in investing in any international mutual fund, you can do so in two ways – by investing online and offline.

You can invest online through online investment portals or through asset management companies offering international mutual funds. You can also invest using the traditional, offline method, where you invest through a broker or submit a completed form to a fund house.

How are International Mutual Funds taxed?

  • Short term capital gain booked on redeeming units before 3 years of investment is taxed as per the tax slab of the investor.
  • Long term capital gain (LTCG) booked on redeeming units after 3 years of investment is taxed @ 20% (with cess and surplus, if applicable) with indexation benefit.
  • Dividends are taxable as per the tax slab of the investor. TDS of 7.5% (normally 10% till March 31, 2021 due to Covid pandemic) is deducted by the mutual fund house for resident investors. Non-resident investors are subject to TDS at 20%. Tax credit of TDS deducted can be claimed at the time of filing the return.

Risks of Investing in International Mutual Funds

  • Exchange rate risk: Fluctuations in foreign exchange rates, especially appreciation in the rupee, can adversely affect the returns of international funds.
  • Foreign Market Risk: International funds expose their investors to the market, political and economic risks of the foreign economies in which the fund is investing. The risk is higher in case of investments in emerging or frontier markets which lack regulatory framework, market efficiency and liquidity.
  • Concentration risk: International funds with concentrated investment portfolio may suffer from high risk, low liquidity and high return volatility

Frequently Asked Questions About International Mutual Funds

Should I invest in International Mutual Funds?

International funds allow you to become an owner of some of the biggest companies in the world such as Apple, Google and Microsoft. In addition to benefiting from the growth of these global giants, you also reduce your portfolio risk because your returns are no longer dependent on the performance of one market. Additionally, you can benefit from currency fluctuations. For all these reasons, it is a smart idea to make some investments in International Mutual Funds.

Are International Mutual Funds High Risk?

International mutual funds invest in equities, so in the short term, they can be volatile. However, over the long term, the risk is substantially reduced.

What kind of returns can I earn from International Funds?

International funds have given an average return of 38.49 per cent in the last 1 year. Their 3 and 5 year returns are 12.81% and 13.55%.

Where do International Mutual Funds invest?

International Mutual Funds invest in stocks listed outside India. There are funds that invest in a specific country or region. Then there are funds that invest around the world. There are also funds that decide a theme and pick stocks from different markets that fit the theme.

For how long should I stay invested in International Mutual Funds?

Since International Mutual Funds are equity funds i.e. they invest in shares of companies, you need to stay invested for at least 5 years.

Which are the best International Mutual Funds to invest in 2021-22?

These are the top international funds you can invest in
Edelweiss Greater China Equity
PMG India Global Equity Opportunities Fund
Franklin India Feeder Franklin US Opportunities Fund
Nippon India US Equity Opportunities Fund
DSP World Mining Fund
Aditya Birla Sun Life International
ICICI Prudential US Bluechip Equity Fund
Principal Global Opportunities Fund

See also  What are Mutual Funds? What is Mutual Funds?
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