Diversification simply refers to not putting all your eggs in one basket. When you diversify your investment, you distribute your money among different asset classes and investment instruments. Since different investments perform differently, the losses of one can be overcome with the profits of another.
Portfolio diversification is not limited to different asset classes only. It can also be done by investing in international mutual funds. This gives you exposure to different markets other than the domestic market. Keep reading to find out more.
What are international mutual funds?
International mutual funds are funds that invest in stocks of companies that are not listed in India. These are equity funds and can carry some risk, but they also offer you exposure to some of the biggest international companies.
How to create a diversified portfolio with international mutual funds?
1. Invest for the long term:
International mutual funds are equity funds. Hence, it may be advised to invest in them for the long term. They can be used for goals like retirement, a child’s higher education expenses, a home purchase in the future, etc. You can invest in these funds for at least five years or more. Moreover, just like domestic funds, they also offer the option of investing through a SIP (Systematic Investment Plan) as well as in a lump sum. So, you can take a call according to your preference.
2. Invest up to 10% in international funds:
Allocating up to 10% of your investment portfolio to international mutual funds can offer adequate geographical diversification. International funds invest in companies and sectors that are not available in India. Interestingly, they have delivered returns averaging 18.8% in the last one year. So, adding these to your portfolio can be a great way to tap into global growth opportunities.
3. Look for the best-performing international funds:
Make sure to do some research and pick the best-performing mutual funds to maximize your returns. For example, PGIM India Global Equity Opportunities Fund, ICICI Prudential US Bluechip Equity Fund, Franklin India Feeder Franklin US Opportunities Fund, etc., are some options that have delivered high returns in the past. You may take a professional financial advisor’s help to decide on the most suitable mutual fund for your goals and risk appetite.
Who should invest in international mutual funds?
International mutual funds carry high risk. So, they may be ideal for investors with a high-risk appetite. They can also be suitable for investors looking to diversify their portfolios as they can offer an advantage over currency fluctuations, as your returns here do not depend on the performance of one market and instead get spread over multiple markets.
To sum it up
International mutual funds can help you achieve your long-term goals. They can expose you to better market opportunities, deliver higher returns, and diversify your portfolio. Hence, investing in them can benefit you in many ways.
You can browse through the Tata Capital Moneyfy app and pick the best international mutual funds as per your needs.