Should you consider adding international funds to your portfolio?

Globalisation and ever-increasing international trade dim geographical borders seemingly making the world closer with each passing year. Yet, somehow most of us seem to limit our investment avenues to options available in the domestic market. A relatively untapped investment avenue however which may be worth considering is international investments. Relatively untapped until recently, these seem to be now gathering considerable steam amongst HNIs, brokers and financial advisors.

Global stock markets rose considerably in 2019, primarily riding on the back of high performing global tech stocks1. Wondering how you can capitalise on the performance of these global leaders?

These funds have in fact been one of the top performing categories of mutual funds in 2019 – delivering returns of 18.85%.²

• What do International Mutual Fund Schemes invest in?

  As is the premise of most equity mutual funds schemes, these funds invest in a basket of different stocks, the difference being that they predominantly invest in shares of different global companies. The selection of global companies depends on the investing strategy of every international mutual fund scheme. Indian AMCs today offer several types of international mutual funds schemes.

• Why you may consider them?

  1. Takes your portfolio diversification global

     Incorporating diversification across investment classes and across sectors in your portfolio is the mainstay of any investment planning. Investing in mutual funds aims to give you a wholesome diversification opportunity, allowing you to invest in the companies across different global markets.

  2. Access to a wider growth potential

     The global stock markets have a market capitalisation of over USD 70 trillion³ and house some of the largest and most successful companies of the world. International mutual funds schemes aim to give you an effective means of participating in the growth of some of global leaders.

  3. Reliance on expert knowledge to analyse global economies

     Very few investors can claim to have expert enough knowledge to track and study global economies and markets to be able to make prudent global investing decisions. International mutual funds schemes can give you access to expert fund managers for informed global stock selection.

  4. Complement your domestic investments

     When your portfolio primarily relies on domestic rupee-denominated investments, a drastic fall in the value of the domestic currency can negatively impact your wealth. International investments denominated in foreign currencies can aim to work as a risk mitigation strategy for your domestic investments and may reduce the overall volatility of your portfolio.

• How much?

  International mutual funds schemes while giving you a potential for reasonable returns, like all equity funds also have its fair share of risks. The allocation to these investments in your portfolio will depend on your investing objective and risk appetite

• Finally, choose wisely...

  Ultimately like all other investment decisions, it is important to be prudent while selecting your international mutual fund investments. Study the funds, it's portfolio and risk profile via a vis your own.

So, do not limit yourself when it comes to your investments, think globally, aim to go global and you can give your portfolio a chance to scale new heights!

Sources:

1. https://www.cnbc.com/2019/12/30/apple-and-amd-were-the-best-stocks-of-2019.html

2. https://economictimes.indiatimes.com/mf/analysis/gold-international-mutual-funds-offer-20-returns-in-2019-what-should-be-your-strategy/articleshow/73573921.cms?from=mdr

3. As per Wikipedia – as on 31 December 2019

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.