International mutual funds: Basics, types, applicability, and investing

International mutual funds

Investing in international mutual funds can open up a world of possibilities to investors, offering them the opportunity to grow their wealth through a range of assets across the globe. With a single investment, one can take advantage of market-specific trends and capitalise on potential growth opportunities while minimising risks associated with currency fluctuations. But before investing in international mutual funds, it’s important to understand the basics, types of funds available, benefits, and how to get started. With that being said, let’s take a look at everything investors need to know about investing in international mutual funds. 

Understanding the basics of international mutual funds

International mutual funds invest in instruments in foreign markets. For instance, international equity funds invest in stocks of companies listed on the stock exchange of a country outside of India. 

The advantage of investing in such funds is that they provide a better diversification option for investors who want exposure to stocks from different countries and industries. 

Types of international mutual funds

  • Global sectoral funds– Invest in foreign companies that belong to a particular sector, such as mining or energy. 
  • Global thematic funds – Focus on global companies related to a specific investment theme, such as emerging markets or renewable energy.  
  • Country funds – Limit their investments exclusively to a single country, allowing investors to gain deeper insight into a particular market. However, these funds require extensive research.
  • Regional funds – Focus on companies from a specific geographical region, such as Southeast Asia.  
  • Global funds – Invest in companies worldwide without any geographical restrictions.

How to invest in international mutual funds?

Investors can invest in mutual funds that particularly focus on international investments via the online platform of the mutual fund house, such as their official website or mobile app. The steps are:

  • Install the mutual fund investment app or visit the website of the chosen fund house. 
  • Register and log into the account. Here, investors will need to provide basic information such as name, email address, and phone number to register and create an account.  
  • Click on ‘mutual funds’. Here, investors can find all top mutual funds available, including those international funds.  
  • After selecting an international mutual fund by analysing its performance and associated risk, click on “invest”.
  • Enter the investment amount along with the method – lump sum investment or a Systematic Investment Plan (SIP).  
  • Now complete all KYC details by providing Aadhaar, PAN, and bank details to confirm the investment in mutual funds.  

Benefits of international mutual funds

  • Access to global markets under professional management 

International mutual funds are managed by professionals who have experience in navigating global markets and identifying the best mutual funds to invest in. These professionals constantly monitor the markets and make adjustments based on market conditions so that investors can take advantage of potential opportunities as they arise. 

  • Risk mitigation through geographical diversification

Investing across different countries helps spread risk and provides stability when markets fluctuate. Since global markets can be affected by different economic conditions and events, having investments in multiple countries can help mitigate losses that may occur due to sudden fluctuations in one market or another. 

  • Exposure to new international opportunities 

International funds allow investors to access diverse fresh investment themes not available in the domestic market – such as new, innovative business ventures led by emerging technologies. International fund investments also allow to capitalise on new trends and movements in the global markets, giving investors more options for profitable investments and diversification.

The bottom line

International mutual funds can be a great way to add diversity and growth potential to your portfolio but like all investments, investors should carefully consider all aspects, including fees and expenses (including commissions), past performance track record, economic and political risks, and most importantly, currency risk.

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