Investing In International Funds

International funds are mutual fund schemes that seek to invest in securities of foreign companies that are listed in the foreign markets. While on the one hand these funds open a new door for investors seeking to broaden their portfolio, there are certain risks too that might keep conventional investors away from them. The article explores both sides of the coin

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These days, investing in international markets is what is catching the fancy of investors. And this can well be attributed to the returns that international funds have generated in recent times. If we look at the average one-year trailing returns of international funds, they make an impressive cut with around 52 per cent on an average. Further, on a trailing one-year basis, the highest return generated by international funds is 108 per cent and the lowest return is 5 per cent, as per RupeeVest. Here we have also assumed fund of funds (FoF) overseas. Therefore, wherever we have stated international funds, it includes FoF overseas.

The above graph clearly shows that international funds have been giving good returns in the last couple of years. Also, the returns generated in the years 2019 and 2020 are the highest average calendar year returns that this category has generated in the past 10 years. No wonder why most of the mutual fund advisors are recommending them. Making investments based on the recent returns would make you surrender to the recency bias. Rather, it is more prudent to take a holistic view before committing to any fund. The following paragraphs provide insights into what international mutual funds mean, their different types, and whether you should invest in them now.

Defining International Funds