As Indian investors seek broader opportunities, many are now looking beyond domestic markets for growth. This is where international mutual funds come in. These funds invest in stocks and sectors outside India, giving investors exposure to global companies, foreign currencies, and high-growth regions that aren’t available in the local market.
In this article, we’ll explain how international mutual funds work, their advantages, risks, types, returns, the best use cases, and how to invest in them.
Key Takeaway
- International mutual funds invest in companies and markets outside India.
- They help diversify your portfolio beyond the domestic economy.
- Potential to benefit from sectors that India lacks (e.g., AI, cloud, EVs, biotech, semiconductors).
- Currency movement can add to returns—or reduce them.
- Suitable for long-term investors seeking global exposure, not short-term traders.
- Returns can be uneven due to foreign markets and geopolitical risks.
What Are International Mutual Funds?
An international mutual fund is a fund that invests in companies and securities listed outside your home country. For example, a fund based in India might invest in U.S. tech stocks, European consumer brands, or Asian emerging markets. This differs from domestic equity funds, which invest only in local markets.
Related terms you’ll hear include: international equity mutual funds, international equity fund, international index funds, and simply international funds. They create exposure to global markets via a single investment vehicle.
Best International Mutual Fund
Here are some popular international mutual fund options in India, along with a brief description of what they offer:
- Mirae Asset NYSE FANG+ ETF FoF: Focuses on high-growth U.S. tech & internet companies via the NYSE FANG+ Index.
- Edelweiss US Technology FoF Direct – Growth: Invests primarily in U.S. technology stocks through offshore exposure.
- Kotak Nasdaq 100 FoF: A fund of funds tracking the Nasdaq 100 index, giving large-cap U.S. exposure.
- Invesco India – Invesco Global Equity Income FoF Direct – Growth: A global equity fund of funds offering diversified international exposure.
How Do International Mutual Funds Work?
International mutual funds invest your money into markets outside your home country using different structures. These funds allow you to participate in mutual fund foreign investment and benefit from global growth themes without needing a foreign brokerage account.
Here’s how they usually operate:
- Direct foreign stock investments: The fund directly buys international stocks (e.g., Microsoft, Toyota, Samsung).
- Feeder funds: Your local fund invests in an overseas master fund that manages the global portfolio.
- Fund of Funds (FoFs): The fund invests in multiple international funds globally to diversify across geographic markets.
- International Exchange Traded Funds (International ETFs): Some funds invest in global ETFs that track specific countries, sectors, or indices.
How returns are affected
The NAV of an international mutual fund changes due to:
- Performance of global stock markets
- Currency fluctuations (e.g., USD/INR movement)
- Economic cycles in foreign markets
- Sector-specific performance (e.g., global tech boom)
- Fund expense ratios & fees
How to Invest in International Mutual Funds
You can start investing in international funds through several simple methods. Here’s a practical roadmap:
Steps to invest
- Choose a mutual fund platform, broker, or AMC
- Complete KYC if not already done
- Shortlist an international mutual fund category
- Assess risk, currency exposure, and region focus
- Decide between SIP or a lump sum
- Start investing & monitor periodically
Important considerations
Before making a mutual fund foreign investment, review:
- Region/country exposure (U.S., Europe, Japan, etc.)
- Sector concentration (tech-heavy or diversified)
- Currency risk
- Fees & expense ratio
- Volatility vs your risk appetite
- Recommended holding period (usually long-term)
Types of International Funds
International funds come in different formats based on their structure, region, and investment strategy. Each offers unique diversification benefits and risk levels.
International Equity Mutual Funds
These mainly invest in equity markets outside India. They allow you to own shares of foreign-listed companies through a domestic mutual fund structure. They are the most common way retail investors access international equities.
International Index Funds
These track global indices such as the S&P 500 or NASDAQ-100. Some examples include:
- S&P 500 index–linked funds
- NASDAQ-100 index funds
These provide low-cost exposure to top global companies. Since they track an index, they offer passive diversification.
Region-Specific International Funds
These invest in one geography, such as:
- U.S. equity funds
- Europe-focused funds
- Japan-focused funds
- Emerging market funds
Theme-Based Global Funds
These target global themes are unavailable or underdeveloped domestically, such as:
- Technology
- AI & Robotics
- Electric Vehicles (EV)
- Biotech & Healthcare
Global Funds vs International Funds
Global funds invest worldwide, including the investor’s home country. At the same time, international funds invest everywhere except the investor’s home country.
Benefits of Investing in International Mutual Funds
Investing in global markets provides several advantages, especially compared to only holding domestic assets. Key benefits include:
- Global diversification reduces reliance on one economy
- Access to global leaders like Apple, Nvidia, Amazon, Toyota, etc.
- Exposure to sectors with limited representation in India (AI, EV, cloud tech)
- Currency appreciation can add to returns
- Better long-term growth potential through U.S. & developed market exposure
- Opportunity to participate in innovation-led regions
- Top international mutual funds and global ETFs help reduce concentration risk
- Acts as a hedge if the domestic market underperforms
Who Should Invest in International Mutual Funds?
International mutual funds are better suited for investors who want to expand beyond domestic equity and participate in global growth stories. They work best for those who understand market risk and are willing to stay invested for a longer period.
Ideal profiles include:
- Investors seeking mutual funds with international exposure for portfolio diversification.
- Moderate to high-risk investors who can handle foreign market volatility.
- Long-term investors with a horizon of 5 years or more.
- Individuals aiming to benefit from global innovation (AI, tech, EVs, biotech, cloud, etc.).
- Investors who do not want to open overseas trading accounts but still want foreign exposure.
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How to Choose the Best International Funds
If you’re evaluating the best international mutual funds or looking to shortlist from the top international mutual funds, here are the key filters that matter:
- Market focus of the fund: Does it target the U.S., Europe, Japan, China, or global exposure? Choose markets aligned with your outlook.
- Historical consistency: Look at multi-year performance across cycles rather than recent returns.
- Expense ratio: International FoFs tend to have higher costs; lower fees support better compounding.
- Fund house reputation & track record: Experienced AMC and stable management means better execution.
- Underlying index or investment strategy: Understand whether it tracks
- a global index
- a country index
- a thematic portfolio
- a feeder fund
- or an active global fund
- Currency exposure: Gains or losses can come from INR–USD movement.
Conclusion
International mutual funds give investors a straightforward way to participate in global markets, diversify beyond domestic equities, and tap into sectors and companies unavailable locally. While they offer meaningful long-term growth potential, they also come with added risks such as currency swings and geopolitical events.
For investors willing to take a measured level of risk, international funds can complement a core portfolio and strengthen long-term wealth building. As always, evaluate carefully, compare options, and consider speaking to a financial advisor before investing.
FAQs on International Mutual Funds
What is an international fund?
An international fund is a mutual fund that invests primarily in companies and markets outside your home country.
Are international funds good for beginners?
Yes, if approached slowly and for the long term. Beginners can start with low allocation and SIPs.
How much should I allocate to foreign markets?
Allocation varies by investor, but many start with a small percentage and increase gradually based on comfort and goals.
Can I invest through SIP?
Yes, most international mutual funds allow SIP investments like any domestic fund.
Are international index funds safer?
They are generally more diversified and lower-cost than active funds, but still carry market and currency risks.
Disclaimer
The information provided in this article is for educational and informational purposes only. It should not be considered as financial or investment advice. Investing in stocks involves risk, and it is important to conduct your research and consult with a qualified financial advisor before making any investment decisions. The author and publisher are not responsible for any financial losses or gains that may result from the use of this information.
