Why should you invest in international funds?

Henil Shah
Why should you invest in international funds?

We have seen a spectacular rally in the markets post-pandemic, which was witnessed globally as well. This has attracted more investors to international funds. Here is our guide to going global with international funds.

Although our country is India, we do use international products and services on a daily basis. Waking up in the morning with the sweet voice of Alexa from Amazon, which also plays your favourite songs. Apart from this, we do shopping online via Amazon, especially on Great Indian Festival days. On the way to the office, you check mails on Microsoft Outlook. You remain in touch with your friends and relatives and share your life events via Facebook. One can never forget watching their favourite movies and web series on Netflix? Google is another thing that helps you search anything on the go, helps you reach your destination via google maps, enables you to watch and also create and post content on YouTube. Most importantly, most people use Gmail as their personal mailing app.  

If we just have look, our day-to-day life is dependent heavily on the US as well as non-US brands. Hence, it does make complete sense in allocating some of your assets to international mutual funds to invest in these global brands.  

Why invest in international funds?  

  • Helps you diversify country-specific risk  

While investing, rarely do people recognise the country risk associated with our home country. But it is wise to consider such risks when you build a mutual fund portfolio. The risks such as natural calamities, epidemics, pandemics, geo-political tensions like war, trade wars, etc. You can diversify such country-specific risks by investing in international funds.  

  • Helps you diversify currency risk  

Though currency risk is not a problem for those spending in their home country, people who are likely to spend in foreign currency for their kids’ university fees abroad or going on a world tour, might get impacted by depreciation in domestic currency. For instance, you are saving in domestic currency for your child’s higher education in some universities in the US, but you would be paying its fees in dollars. In such cases, investing in international funds that prominently invest in the US region aids you diversify your investment portfolio against the depreciating rupee.  

  • Helps you get exposure to global trends  

The Indian stock market is still dominated by companies in sectors such as banking, financial services, oil & gas, IT outsourcing, Fast Moving Consumer Goods (FMCG), pharmaceuticals, automobile and ancillaries, cement, etc. On the other hand, in developed economies, you would find technology companies to be dominant. For example, the top five companies by market capitalization in the S&P 500 index are technology companies.  

To give you a rough idea, below is the list of top 10 companies by market capitalization in the S&P 500 index.

Company

Weights (%)

Microsoft Corporation

6.43

Apple Inc.

6.36

Amazon.com Inc.

3.92

Tesla Inc

2.36

Alphabet Inc. Class A

2.22

Alphabet Inc. Class C

2.09

Meta Platforms Inc. Class A

2.05

NVIDIA Corporation

2.00

Berkshire Hathaway Inc. Class B

1.33

JPMorgan Chase & Co.

1.24

 

 

In the above table, we have highlighted technology companies. You can see that; seven out of 10 companies are technology companies. Therefore, when you invest in international funds, you can ride the megatrends taking place globally. 

 

Below is the list of the top five international funds

Funds

Trailing Returns (%)

1-Year

3-Year

5-Year

PGIM India Global Equity Opportunities Fund

25.41

35.32

23.98

Principal Global Opportunities Fund

39.00

21.85

16.93

Sundaram Global Brand Fund

22.19

18.13

13.41

Aditya Birla Sun Life Global Emerging Opportunities Fund

28.18

21.37

12.13

DSP World Energy Fund

37.57

11.63

7.13

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