As the name suggests, the fund invests in the international market except in the country the investor is residing. International funds invest in foreign companies not listed in the investor’s country.
Like we have different funds based on market cap, i.e. large-cap, mid-cap, and small-cap funds. Similarly, international funds invest in different sizes of companies.
Types of International Funds
International funds are available for Indian investors to invest in. And these funds could have a different approach to investing in the international market. Let’s see the categories:
1. Regional fund
These funds invest in the stock market of a specific country or region. Some funds may offer investment in the US market only, and others may offer investment in Asian markets only.
The main objective is to gain the maximum benefit from investments in the developing stock market of a specific county or region.
2. Thematic funds
These funds invest in a specific theme around the global stock market like artificial intelligence, infrastructure, semi-conductor, etc. The companies in these funds are foreign companies.
3. Global sector funds
These funds invest in the focused sector foreign companies to benefit from its development.
4. Global funds
Though the international and global funds sound similar, they are not. International funds invest in the world stock market except for the country the investor is residing.
On the other hand, global funds invest around the world stock market, including the country the investor resides.
Advantages of International funds
1. Geographical Diversification
By investing in these funds, your portfolio can benefit from geographical diversification. There are chances that some countries may outperform other countries. If such a scenario happens, your portfolio will benefit from it.
2. Currency benefit
International funds give you the benefit of currency depreciation. Over the period currency, INR has depreciated against the USD. For instance, in 2008, USD to INR was at Rs.40 against $1, but in 2022, USD to INR is at Rs.80 against $1.
If you had invested $1 in 2008, you could have only gained 100% on currency depreciation. That’s how currency depreciation helps your portfolio to grow.
3. Global Opportunity
The opportunity worldwide is immense, and some world-leading companies have products and services in almost every country.
Companies like Apple, Google (Alphabet), Facebook (Meta), etc. International funds provide the opportunity to invest in these companies.
Factors to consider before investing in international funds
There are some essential points that you need to consider before investing:
1. Global exposure
If you want your portfolio to get global exposure, you can consider investing in these funds.
2. Risk
International funds are exposed to high-risk factors like currency risk, policy risk, trade risk, etc. All these factors could increase the volatility of the portfolio.
3. Expense ratio
International funds could have a higher expense ratio which funds can charge for maintaining the fund.
4. Economy risk
Each country’s economy works differently, and all the macroeconomic factors could impact your portfolio returns in both ways, positively and negatively.
Who should invest?
Investors with a high-risk appetite looking for an opportunity with extra returns and who want to hedge their portfolio against the currency risk should consider investing in these funds.
Example of International Fund
Name: iShares Core S&P 500 ETF
Launch Date: May 15, 2000
Ticker: IVV
Index Tracked: S&P 500 Index
Performance:
| IVV | ETF Database Category Average | |
| 1 Month Return | 11.09% | 11.05% |
| 3 Month Return | 5.21% | 5.37% |
| YTD Return | -9.26% | -14.58% |
| 1 Year Return | -1.20% | -9.01% |
| 3 Year Return | 55.85% | 34.96% |
| 5 Year Return | 92.84% | 44.48% |
Top 5 sectors
| Sector | Weightage |
| Technology | 17.70% |
| Electronic Technology | 15.42% |
| Finance | 13.21% |
| Health Technology | 10.44% |
| Retail Trade | 7.54% |
Top 10 holdings
| Holdings | % Assets |
| Apple Inc. | 7.32 |
| Microsoft Corporation | 6.04 |
| Amazon.com Inc. | 3.48 |
| Tesla | 2.09 |
| Alphabet Inc Class A | 2.03 |
| Alphabet Inc Class X | 1.87 |
| Berkshire Hathaway Inc. Class B | 1.51 |
| UnitedHealth Group Incorporated | 1.41 |
| NVIDIA Corporation | 1.30 |
| Johnson & Johnson | 1.20 |
How can one invest in these funds?
The process has become effortless with the EduFund app.
- Download the app for Android and iOS.
- And do the KYC process.
- Add funds and select the fund in which you want to invest.
- And place the order.
If not sure where to invest, connect with the EduFund team
FAQs
What are international funds?
International funds invest in foreign companies outside the investor’s home country, providing exposure to global markets.
What types of international funds are available for Indian investors?
Indian investors can choose from regional funds, thematic funds, global sector funds, and global funds, each with a unique investment focus.
What are the advantages of investing in international funds?
Advantages include geographical diversification, currency benefits from depreciation, and the opportunity to invest in world-leading global companies.
What factors should investors consider before investing in international funds?
Consider factors such as global exposure, risk (including currency and policy risk), expense ratios, and the impact of different economies on portfolio returns.
Who should consider investing in international funds?
Investors with a high-risk appetite seeking extra returns and looking to hedge against currency risk can benefit from investing in international funds.
Disclaimer
This is not recommendation advice, use it for educational purposes only
