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[Updated on 15th October 2021]
Picking stocks on your own can be challenging especially when it comes to international companies because there are too many options and factors that you need to evaluate.
However, there’s a solution: International mutual funds! In this blog, we’ll walk you through some fundamentals and share some of the best international funds currently being recommended on Cube Wealth.
International funds are Indian equity funds that invest in the shares of foreign companies like Apple, Amazon, Barclays, Deutsche Bank, Fiat, Novartis, etc.
International mutual funds ensure that you do not have to deal with the time-consuming and complex task of picking individuals foreign stocks on your own.
A fund manager does that for you with the fund’s portfolio of international holdings. But that’s not all. Investing in an international fund is as easy as investing in any other mutual fund.
Other highlights of international funds:
Broadly speaking, international funds are of 3 main types based on where they invest in. Furthermore, there are 3 subgroups of top international mutual funds based on how they invest.
This group includes global, regional, and sectoral international mutual funds.
The term global international funds may seem like a tautology but there’s a reason for that. Global funds invest in stocks from across the world and not just one country.
For example, PGIM India Global Equity Opportunities Fund invests in stocks from the USA, France, Singapore, Netherlands, Switzerland, and more through the PGIM Jennison Global Equity Opportunities Fund.
Regional international mutual funds are the opposite of global funds. They invest in the stock market of only one country or region. Index funds are a great example.
They track one index from a single market (country). For example, Motilal Oswal S&P 500 Index Fund, which invests in all the stocks from the US index S&P 500.
Thematic or sectoral funds are highly specialised funds that look to gain from the benefits of a specific sector. For example, healthcare, power, consumer durables, and others.
There are 3 main types of international funds apart from the typical international funds that buy and sell stocks directly. These include index funds, fund of funds, and feeder funds.
International index funds track a particular index like the S&P 500 or FTSE 100. Their portfolio will mirror the index they’re tracking. For example, an S&P 500 index fund will include all stocks from the index.
Index funds, in general, look to generate returns that are on par with the market. Furthermore, most index funds are passively managed so their investment fee is known to be relatively low.
An international fund of fund scheme invests in the units of another mutual fund instead of buying and selling stocks itself. It’s important to note that fund of fund schemes can invest in multiple mutual funds.
An example of an international fund of fund scheme in India includes Edelweiss Greater China Equity Off-shore Fund. It invests in the units of the JPMorgan Funds - Greater China Fund.
In principle, an international feeder fund is similar to a fund of fund scheme but with one main difference - it only has one parent fund known as the master fund.
A feeder fund basically transports money that’s pooled from several investors to the master fund. For example, Franklin India Feeder - Franklin U.S. Opportunities Fund.
Wealth First, Cube's mutual fund advisory partner, handpicks the best international funds for you on the Cube Wealth app.
This international fund invests in another mutual fund, the JPMorgan Funds - Greater China Fund. It’s a fund of fund scheme that gives you access to top-performing Chinese stocks like Alibaba and Tencent.
As you know, Edelweiss Greater China Equity Off-shore Fund only invests in the JPMorgan Funds - Greater China Fund. However, let’s take a look at the top 5 holdings in the portfolio of the offshore fund.
This is an international feeder fund that feeds money into the Franklin U.S. Opportunities Fund. The underlying fund gives you access to top-performing US stocks like Microsoft, Google, Tesla, and more.
Let’s take a look at the top 5 holdings in the portfolio of the master fund, Franklin U.S. Opportunities Fund.
This is a global fund of fund that invests in PGIM Jennison Global Equity Opportunities Fund. the underlying fund holds stocks from across countries like Brazil, Singapore, the USA, England, and more.
Let’s a look at the top 5 holdings of the underlying fund, the PGIM Jennison Global Equity Opportunities Fund.
This is an index fund that tracks the S&P 500. It mirrors the US index and includes stocks like Apple, Amazon, Google, Netflix, Microsoft, and more.
Let’s look at the top holdings of the Motilal Oswal S&P 500 Index Fund.
This international fund invests in the Japanese stock market. That’s not all, a part of the portfolio is also invested in debt and money market assets in India.
Let’s look at the top 5 holdings in the portfolio of Nippon India Japan Equity Fund.
Motilal Oswal Nasdaq 100 Fund of Fund invests in the Motilal Oswal Nasdaq 100 ETF, which makes it a fund of fund scheme. Motilal Oswal Nasdaq 100 ETF mirrors the Nasdaq 100 index.
Let’s look at the top 5 holdings in the portfolio of Motilal Oswal NASDAQ 100 ETF Fund.
This fund allows investors to take part in the growth of the European market. Invesco Pan European Equity Fund invests in high growth European companies.
Let’s look at the top 5 holdings in the portfolio of Invesco Pan European Equity Fund.
Investing in international funds is as simple as investing in any other mutual fund. This means that you have two options:
Intermediaries like investment apps allow you to buy regular international mutual funds. Regular international mutual funds typically have a higher expense ratio than direct international mutual funds. But they're ideal for busy professionals who have no time to for in-depth research.
AMCs offer a way to buy "direct" international mutual funds. The investment cost, mainly the expense ratio, for direct mutual funds is lower than regular mutual funds.
However, you'll have to do the research yourself and pick international funds that suit your investment portfolio.
Here's how handpicked mutual funds work on the Cube Wealth app
Note: Facts & figures are true as of 15-10-2021. All information mentioned is for educational purposes and relies on publicly available information. None of the information shared here is to be construed as investment advice. We strongly recommend you consult a Cube Wealth coach before investing your money in any stock, mutual fund. PMS or alternative asset.
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