International funds are mutual funds that invest in companies, funds or other securities outside India. Companies can include top global giants like Apple, Microsoft, Alphabet, Nvidia, and the like. Instead of putting all your money into Indian markets, these schemes give you a way to invest in markets such as the US, Europe, Japan, Taiwan and other countries.

With these schemes, you get international exposure through a mutual fund, so you don’t have to directly open accounts or buy stock in foreign markets. While they offer better diversification, they also add risks that you don’t face with a purely Indian portfolio, such as exchange rate fluctuations and geopolitical risks.

International mutual funds can be a good investment option for you if:

• If you want exposure to global opportunities: Some well-known global businesses are not listed in India. International funds can give you indirect access to such companies through a professionally managed portfolio.
• If you have long-term goals: Foreign equity markets can also go through long periods of ups and downs. If you have a longer time horizon, you can give your investment more time to deal with short-term volatility.
• If you can handle forex-related risks: Your returns can change due to changes in the rupee’s value against foreign currency. If you are comfortable handling the impact of forex changes on your investment, then international schemes can suit you.
• If you already have a diversified portfolio: If you have a balanced base of domestic investments such as large cap funds or flex cap funds, you can consider expanding to international markets for more exposure.

International funds work like any other mutual fund. When you invest via SIP or make a lump sum investment in an international scheme, the fund manager invests the money in securities outside India. It is done either directly or through an overseas fund, depending on the scheme’s structure.

Here’s a simple example. Suppose you invested ₹5,000 in an international mutual fund scheme. Now, if the foreign companies in the fund’s portfolio perform well, the fund’s NAV will increase.

If the NAV rises by 10%, your ₹5,000 becomes ₹5,500. But since the NAV can also fall, if it drops by 5%, your investment temporarily falls to ₹4,750.

But there’s also currency risk involved here. If the rupee gets stronger, the fund’s NAV can drop, and so will your return. And if the rupee gets weaker, the fund’s NAV could rise, and so will your investment value.

There are different international funds to invest in, depending on the countries, regions or themes they focus on, such as:

• Global funds: These funds invest across several countries and markets. Their portfolio can be spread across different parts of the world.
• Country funds: These funds focus mainly on one foreign country. They can give you focused exposure, but your investment is also more dependent on that country’s economy and market.
• Regional funds: These funds invest in a particular region, such as Asia or Europe. You get exposure to several countries within that region.
• Thematic funds: These funds focus on a particular sector or theme across different countries. For example, a fund may focus on artificial intelligence (AI) companies around the world.
• International fund of funds: These funds invest in one or more overseas funds instead of buying foreign securities directly. The underlying overseas fund then manages the investments.

• Diversify across countries: Different countries can perform differently at different times. Your portfolio does not have to depend only on the Indian market.
• Access to markets you may not easily invest in yourself: An international mutual fund gives you a simpler way to participate in foreign markets through a mutual fund structure.
• Invest in top global businesses: You can get exposure to top companies and leading industries that may have little or no representation in India’s stock market.
• Add another source of returns: Your returns can come from the performance of foreign investments as well as changes in the exchange rate. This can be beneficial when the rupee depreciates against foreign currency.

• Currency risk: If the rupee strengthens against foreign currency, it can reduce your returns when converted back into rupees. A weaker rupee can have the opposite effect. That’s an extra layer of risk you face over the regular market risk.
• Foreign market risk: A stock market correction in the country or region where the fund invests can reduce the value of your investment.
• Political and economic risk: Changes in government policies, interest rates, regulations or economic conditions in another country can affect companies and markets there.
• Concentration risk: This risk is specific to country or sector-focused funds. They can be more volatile than funds spread across many markets.

Here’s a quick comparison between international mutual funds and regular domestic mutual funds:

An international fund is not automatically better than a domestic fund. They serve different purposes. Generally, domestic funds are better for a core portfolio, and international funds are better for further diversification.

There are no best international mutual funds for everyone. The right choice depends on what you want from the investment. Here are a few things you can check before investing:

• Check where the fund invests: A US-focused fund, an Asia-focused fund and a global fund can behave very differently. Make sure the geography matches your expectations.
• Understand the fund’s strategy: Check if the fund invests directly in foreign securities or through an overseas fund. Also see whether it follows a broad or focused strategy.
• Look at the track record: Past returns don’t guarantee future returns, but they can help you understand how the fund behaved across different market conditions.
• Check portfolio concentration: A fund holding companies across many countries may carry different risks from one focused on a single country or sector.
• Check expense ratio, exit load and other costs: Compare expense ratios of similar funds. Also check exit load and other costs as they can affect your final returns, especially if you sell early.

The best international funds for you are not the ones with the highest return in the last year. They’re the ones that meet your financial goals and risk tolerance level.

Once you know what kind of international exposure you want, you can start an SIP on Millions in a few simple steps:

• Get the Millions app from the Google Play Store or the iOS App Store.
• Verify your mobile number and complete KYC to open a free account.
• In the mutual funds section, search and select the international fund that matches your financial goals.
• Tap on SIP and choose how often you want to invest (monthly, weekly, or daily).
• Enter the amount, select your SIP date and complete the payment.

That’s it. You don’t need to invest a large amount at once. A small, regular SIP can help you build international exposure over time. If your portfolio is still new, focus on building a strong base with suitable large cap funds, corporate bond funds, or hybrid funds before adding more specialised investments.