The world is your market: Exploring the power of international mutual funds

In an increasingly connected world, investors are beginning to realise that opportunities for wealth creation are not confined within national borders. While Indian equities have delivered impressive returns over the years, the idea of diversifying into international markets is gaining traction. International Mutual Funds offer investors a simple route to participate in global growth stories without the need to open overseas accounts or trade in foreign exchanges directly.

At its core, an international mutual fund invests in companies listed outside India. The fund could track a global index, such as the S&P 500, or focus on specific regions like the U.S., Europe, or Asia. Some funds even invest in emerging markets to capture high-growth potential. For Indian investors, these funds provide a chance to benefit from global brands such as Apple, Microsoft, Nvidia Corporation, or Tesla, which are otherwise not accessible on domestic exchanges.

Take the example of Motilal Oswal Nasdaq 100 Fund of Fund, which mirrors the performance of the Nasdaq 100 Index. The fund gives Indian investors exposure to some of the world’s leading technology companies. Over the past few years, this category has seen strong interest from investors who want to capture global innovation themes like artificial intelligence, cloud computing, and electric mobility.

Another popular category is PGIM Global Equity Opportunities Fund, which invests across regions and sectors. By spreading investments across multiple geographies, such funds help reduce country-specific risks. For instance, if Indian markets face volatility due to local political or economic issues, global funds can provide a cushion since their performance depends on different economic cycles.

There are more than 30 fund options available to investors, offering average returns in the range of 18-20 per cent. Some of the prominent names in terms of fund size and performance include Edelweiss U.S. Technology Equity FoF, Franklin U.S. Opportunities Equity Active FoF, and ICICI Prudential U.S. Bluechip Equity Fund.

However, it is important to understand that international mutual funds are not risk-free. Currency fluctuations can have a direct impact on returns. When the rupee weakens against the U.S. dollar, investors gain more when redeeming their units, but the opposite happens when the rupee strengthens. Moreover, different countries face varied market dynamics, regulations, and inflation trends, which can affect fund performance. The Tax treatment for such funds also differs from domestic equity funds. This is an important factor to consider when comparing returns with domestic equity funds.

Despite these factors, the long-term benefits of global diversification are hard to ignore. Investing beyond borders allows investors to participate in sectors that may not yet be well represented in India. For example, the Indian market still has limited exposure to global technology giants or healthcare innovators. A U.S.-based mutual fund, on the other hand, could include companies like Johnson & Johnson, Amazon, or Nvidia, offering access to global consumption and innovation trends.

For beginners, starting small and systematic is a good strategy. A Systematic Investment Plan (SIP) in an international fund can help average out market fluctuations and build exposure gradually. Before investing, one should assess the fund’s underlying index, region, and expense ratio, as these factors play a crucial role in long-term performance.

Financial advisors often recommend keeping international funds to about 10 per cent of one’s total equity portfolio. This helps achieve diversification without overexposure to foreign markets. The key is to balance growth potential with risk management.

In the last few years, international mutual funds have evolved from being niche products to becoming an important part of a diversified investment strategy. As global economies expand and innovation continues at a rapid pace, these funds can serve as an effective gateway for Indian investors to tap into international opportunities.

In short, international mutual funds allow investors to go beyond geographical boundaries and participate in the world’s best growth stories, all while staying comfortably invested through familiar mutual fund platforms in India. With careful selection and a long-term approach, they can add both resilience and depth to one’s portfolio.

Disclaimer: The funds mentioned above are for informational purposes only and should not be considered as investment advice.