International Mutual Funds

International mutual funds are those funds that invest in non-domestic securities markets throughout the world. Investing in international markets provides greater portfolio diversification and let you capitalize on some of the world's best opportunities. If investments are chosen carefully, international mutual fund may be profitable when some markets are rising and others are declining.

However, fund managers need to keep close watch on foreign currencies and world markets as profitable investments in a rising market can lose money if the foreign currency rises against the dollar. In recent years international mutual funds have gained popularity. This can be attributed to removal of trade barriers and expansion of economies, which has sparked off growth in various regions of the world.

Things to Consider Before Investing in International Mutual Funds

International Investing Formula:
According to a survey, the best policy for investment is to have a 70% domestic investment and a 30% international diversified funds investment. The survey reveals that this investment strategy is better than having a 100% domestic investment portfolio or a 100% international exposure in terms of risk exposure and return on the capital.

Diversification:
Not all the markets of the world move in one pack, so a downswing in a country's market can be well taken care off by gains in the others. So, it is essential to have diversification in different markets across the world.

Currency Exchange Risk:
You should also factor in foreign exchange currency fluctuations in your investment returns. For example you invested INR 9000 in an international mutual fund. At that time let say one dollar was worth Rs 45.00. This means in effect you invested $200. After an year your investment appreciated to Rs 10,000 but at the same time dollar appreciated to Rs. 50. So due to fluctuation in dollar-rupee rate, your investment is still worth $200

In addition to these considerations, it is advisable to aware of political history and current events before investing in international mutual funds