Should I invest in international mutual funds? Do's and Don'ts

6 Mins

International mutual funds are those funds which invest predominantly in equity, equity-related instruments and debt instruments of companies listed outside India. These funds are also known as overseas or foreign funds. An investor who is looking for a long term investment can prefer this as an alternative in their investment portfolio. This fund invests its accumulated money in the stock market of countries like the USA, UK, Canada, Brazil, etc.

An increasing awareness about mutual fund scheme investments, the need for portfolio diversification has also increased. A diversified plan not only spreads the risk but also gives an investment opportunity to enter across different markets, sectors, risk classes, etc. This fund helps to take advantage of global stock markets. However, understanding the market movement of these markets and economic changes and their impact on fund investment is important.

Thus, the fund managers need to have a constant follow up on the foreign market fluctuation. Similarly, investors with a better understanding of risk and those who have time to study global markets can consider investing in international mutual funds. Moreover, investors should be comfortable with fluctuations in investment value as there are other risks too with global markets.

How much should I invest in international funds?

Ideally, as per financial advisors investors can invest up to 5%-10% of their portfolio in international mutual funds. However, this depends on multiple factors that investors must consider before investing. Firstly, they must understand their risk tolerance level. Next, they must know their investment goals for which they want to invest. Based on these primary factors, investors can allocate a certain portion of their investment to international mutual funds which can help them for portfolio diversification.

This fund can act as an alternative in the investor’s portfolio. Especially for the investors who are looking for a long term investment option. Also, this fund can yield higher SIP return or lump sum return to investors who come along with a better understanding of risk.

Furthermore, by adding exposure to international mutual funds in the investor’s portfolio increases the geographic diversification. It also allows the investors to earn from the market cycle of other country’s economies. With the technical expertise of a fund manager, it also helps the new investor to take an opportunity in the foreign markets.

Which international fund is best?

The following are some of the top performing US equity funds that one can choose to invest.

DSP US Flexible Equity Fund (Growth)
Franklin India Feeder Franklin US Opportunities Fund (Growth)

Explore: US Equity Funds

Why should I invest in international funds?

The major benefit of investing in international mutual funds is geographic diversification in the investor’s portfolio. Investing in foreign markets helps to recover from the current local market crisis. There is a higher probability of long term growth in global markets. Moreover, it gives an investment opportunity for the investor to enter across different markets, sectors, risk classes, etc.

Investing in international funds also gives an advantage of global stock markets. However, it is important to understand the market movement of these markets and economic changes of these countries. These funds are suitable for investors with high risk tolerance levels. One can also utilise the exposure of these funds by aligning towards their financial goals like a child’s higher education, marriage, etc. Investors can balance their portfolio, considering the overall value. Hence, picking the right fund can build a cost-effective portfolio for the investor.

Each mutual fund also has a portfolio manager. A portfolio manager of a fund house can invest the investor’s money in the right places with the help of detailed data, technical expertise and experience of investing in foreign markets. This will help any new investor to take an opportunity in foreign markets through an international mutual fund.

Do I need international funds in my portfolio?

Generally, experts recommend having international mutual funds as a part of an investor’s portfolio. Firstly, it gives a benefit of diversification to the overall portfolio. It gives a chance to widen the scope of investment. Rather than investing all the funds in one sector, one can get the benefit of other foreign markets as well. Furthermore, it will also lower the risk of the overall investment portfolio.

Investing in this fund also comes with the guidance of professional management. Hence, each fund has a portfolio manager. A portfolio manager has expertise and technical knowledge of investing in foreign markets. Thus, any new investor can take an opportunity in foreign markets through an international mutual fund.

Check Out: Best International Funds

How do I invest in international equity?

One can invest in international mutual funds through Scripbox’s online platform. The following are the few simple steps for investing –

Firstly, to start investing with Scripbox, one has to choose a plan.
Secondly, they should set up an investment account.
The next step is to make the payment. The payment can be done instantly or can be set up for a later date.
The money gets deducted from the bank after payment confirmation. The money gets transferred to the respective mutual fund house.
Finally, the mutual fund company allots units to the investors. The investors get the confirmation for the same through email or SMS. This gets updated in the Scripbox account.

An investor can choose to invest a lump sum amount or SIP. Suppose an investor has a considerable investment amount. In that case, they can make a lump sum one-time investment for a long term period. Similarly, SIP can be chosen if an investor wants to invest regularly, maintaining an investment discipline. One can select SIP mode as monthly, quarterly, half-yearly or yearly. Financial experts SIP for first-time investors.

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