Should you consider adding international funds to your portfolio?

International mutual funds are mutual fund schemes which invest in the international markets. These funds either invest passively in another index or actively in the stocks and commodities of companies listed in the international stock exchanges. Moreover, there are feeder funds too which invest in international mutual fund schemes and offer returns based on then returns yielded by international schemes.

International mutual funds have been providing quite attractive returns in recent times and so many investors are opting to invest in them. Should you too?

You can consider investing in international mutual funds because of the following reasons –

  • Exposure to quality stocks

Some of the leading companies, like Microsoft, Apple, Netflix, etc. are listed in international stock markets. If you want to invest in the stocks of these companies and capitalize on their growth, you should choose international funds.

  • Diversification

International mutual funds are recommended for the purpose of diversifying your portfolio. By exposing your portfolio to international investments, you can benefit from the growth in the economy of other countries even when India’s economy might be slow. Moreover, by investing in international funds, you also get the benefit of currency diversification and can get good returns when the rates fluctuate.

  • Benefit of lower correlation  between two markets

When two economies have a low correlation, it means that they do not move in tandem with each other. Thus, if the US and Indian economies have a low correlation when the US economy is rising, Indian economy might rise but by a limited margin and vice-versa. Due to this low correlation, in a rising economy, you can bank on the economy with better performance by investing in international funds.

Given these reasons, you can consider international funds to add to your portfolio. However, before choosing these funds, the following things should be kept in mind –

  • Though international funds invest in equities, they attract debt taxation

  • If there is high currency volatility, your investments might suffer

  • If the socio-political environment of the country in which you are investing suffers, you might get negative returns

  • International mutual funds might involve a higher transaction cost

  • If you are investing in a sectoral international fund, the performance of the sector would determine the growth of the fund. If the sector suffers any socio-political crisis, you would suffer negative returns

  • Choosing the right country is important when choosing international funds. Economies with good growth potential should be favoured so that you can earn good returns.

Best international fund to invest in 2020

You should invest in the best international fund for getting the maximum returns on your investments. For the year 2020, here are the best international funds to choose from –

Name of the fund

1-year return*

3-year returns*

5-year returns*

Edelweiss Greater China Equity Off-shore Fund

33.42%

19.74%

20.48%

PGIM India Global Equity Opportunities Fund

66.37%

29.39%

18.81%

DSP World Gold Fund

45.48%

18.36%

20%

Franklin India Feeder Franklin US Opportunities Fund

45.89%

25.82%

19.65%

DSP World Mining Fund

29.01%

11.03%

18.23%

(*Returns as on 12th November 2020)

(Source: https://www.etmoney.com/mutual-funds/equity/international/50)  

For investing in any of these top-performing funds you can choose ETMONEY’s personal finance app. The ETMONEY personal finance app helps you invest in a range of mutual fund schemes as per your risk profile. Moreover, the app does not levy any commissions or brokerage on your investments allowing you to earn maximum returns with a lower expense ratio. So, choose international mutual funds to diversify your portfolio and invest through ETMONEY’s personal finance app for the best experience.

 

Leave a Reply

Your email address will not be published. Required fields are marked *