4 steps to choose the best international mutual fund

International funds have been in the limelight lately due to their impressive performance over the last few years. These schemes have a strong case since 90% of the investment opportunities in the world are outside India, said Raunak Onkar, Head of research and fund manager, PPFAS Mutual Fund, at the ET Wealth Investment Workshop in Kolkata on February 28. Onkar asked the participants to follow some basic steps to choose a suitable international fund.

“Even big Indian companies have large stakes in the international markets. So if you are anyway exposed to international markets, why not in international funds,” asked Onkar. He said that diversification is the most important starting point to look at international funds.

Many mutual fund advisors also suggest international funds to equity investors as international investing nullifies the country-specific risks like demonetisation, budget, GST etc. However, Raunak Onkar said that it is important to choose a scheme which gives you a good diversification. “When you are investing in an international fund, make sure to invest in a market that is developed. The markets that have 70-80 years of functioning should be preferred,” said Onkar.


Onkar stressed on the fact that retail investors shouldn’t foray into stock investments in international markets or investing directly in international mutual funds. “Reading fact sheets, understanding complex markets, currency issues and language barriers can hinder the investment process. It is better and easier to invest in international funds- Indian mutual fund schemes that are focused on world markets,” said Onkar.

Here are a few points Onkar want investors to keep in mind when choosing an international scheme:

• Choose schemes that are focused on countries with well-developed stock markets: (Countries that have a better and bigger market than India ,so you see less volatility.)
• Fund focused on countries and markets with good corporate governance: (Without good corporate governance you scheme will be exposed to a lot of downgrade and default risks)
• Investing in countries with a good legal system: (A good legal system in the country prevents businesses from shutting down suddenly or protects your money from scams)
• Focuses on strong businesses with long runways (Even if the scheme is investing in a big country like USA which checks all the above boxes, it is important for the scheme to focus on good, long-term businesses to generate returns.)