Mutual Funds Across Borders: Definitions, Kinds, and Benefits
Investing in international mutual funds has become increasingly popular among Indian investors, as they offer a unique opportunity to diversify beyond the domestic market and capitalize on global growth opportunities. Here's a guide to help you navigate the world of international mutual funds in India.
Diversified Portfolios Preferred
Diversified portfolios are the preferred choice for international mutual funds, as they spread the risk across multiple countries and sectors. This approach allows investors to benefit from various growth opportunities around the world.
Top Performing International Funds
As of mid-2025, the top-performing international mutual funds in India based on 3-year CAGR (Compounded Annual Growth Rate) are:
- Mirae Asset NYSE FANG+ ETF FoF with a 3Y CAGR of 53.15%
- Edelweiss US Technology Equity FOF with a 3Y CAGR of 29.22%
- Kotak NASDAQ 100 FoF with a 3Y CAGR of 26.00%
- Motilal Oswal Nasdaq 100 FOF with a 3Y CAGR of 25.99%
- Navi US Nasdaq 100 FOF with a 3Y CAGR of 25.73%
These funds primarily provide exposure to US tech and Nasdaq indexes, reflecting strong returns from that sector and region over the recent years.
Another notable international mutual fund is the Aditya Birla Sun Life International Equity Fund - Plan A, which has a longer track record since 2007 and has delivered a CAGR of about 8.5% since inception, with recent annual returns around 7-8% (2023-24). However, it comes with higher risk and expense ratio.
Investing in International Mutual Funds
Investing in international mutual funds is similar to investing in any other equity mutual fund, with the money being invested in rupees and units of the funds being allocated to investors. You can start investing in international funds with a SIP amount of as low as Rs. 500.
Expense Ratio
Asset-management companies charge a fee called an expense ratio for covering administrative and operating expenses. It's essential to consider the expense ratio while choosing an international mutual fund, as it can impact your returns over time.
Investing Outside India
International mutual funds can invest in countries like Japan, China, the ASEAN countries, Europe, Brazil, and the United States, among others. Before investing, it's crucial to consider the geographical location where the fund primarily invests and the scheme's chosen benchmark.
Economic & Political Risk
Investing in international funds comes with its own set of risks, such as currency risk and economic & political risk. The change in the currency value of the country where the fund invests can impact your portfolio, while political unrest or economic turmoil in the countries where the international fund invests can negatively impact your investment.
Steps to Invest in International Funds
To invest in international funds, you can follow these steps:
- Download the app or visit the website of the mutual fund house you prefer.
- Register and complete the KYC process.
- Choose the international mutual fund you wish to invest in.
- Decide on the investment amount and the investment period.
- Complete the transaction and start investing.
Choosing the Geography or Location
When choosing an international mutual fund, you can consider investing globally or in specific countries like the US, China, or emerging markets, depending on your risk appetite and investment objectives.
Compare the Performance of Funds
When comparing international mutual funds, focus on the consistency of returns offered by the scheme and the performance of the international fund versus its chosen benchmark.
In conclusion, investing in international mutual funds can provide a unique opportunity to diversify your portfolio and capitalize on global growth opportunities. However, it's essential to understand the risks involved and choose a fund that aligns with your investment objectives and risk appetite.
Mutual funds that primarily invest in various sectors and countries can significantly reduce the risk associated with investing, offering a more diverse portfolio. This can lead to potential benefits from growth opportunities across the globe.
Investors should carefully examine the expense ratio of an investment app before committing their funds, as this fee can have a noticeable impact on overall returns over time.
An investor can access multiple geographies through international mutual funds, such as Japan, China, Europe, Brazil, and the US. To make an informed decision, it's important to consider the fund's primary investment location and chosen benchmark before investing.
