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Portfolio diversification helps you maintain risk-reward ratio and create good wealth in long-term. International funds have been gaining popularity among seasoned investors, who make goal-based investments. Since, global markets have a comparatively lower correlation with domestic markets, it helps reducing risk.

Indian investors diversify their portfolio by either investing across different asset classes or by investing in international markets – with the latter having a low traction.

Majority the major large-cap companies across sectors – from technology, automobile, Internet and E-commerce – are listed in US and European markets. Hence, by diversifying their investments across global companies, investors can reduce the portfolio risk and generate better returns in long-term.

So, if you’re looking to add a global flavour to your portfolio, international funds are the way forward. These mutual funds invest in equities or equity related instruments of companies which are listed outside India. These funds work just like domestic mutual funds. You invest in rupees, you are allocated units, and the fund’s NAV is available to measure its performance.

Geographical diversification
According to Hemant Rustagi, CEO of Wiseinvest Advisors,“ International Funds gives the benefit of geographical diversification, so preferably one should invest in these funds initially that holds equities of developed countries like the USA. One should invest at least 10-15% of the portfolio in International Funds. It would make zero sense to invest 3-5% in these funds as hardly there would be any considerable return.’’

However, “if you are a new investor then you should invest in Indian markets. After gaining enough learning from the domestic market, you should move to International markets as International markets like, china, Japan, Brazil, etc are also emerging economies and can perform pertaining to their domestic situations which would be difficult for an Indian investor to track. You can further expand the after gaining confidence” he added.

Benefit from currency movement
Investment in International funds would still be beneficial even though you make an almost a flat return of the invested amount as you invest in rupees but it gets converted into a dollar. While redemption you get the benefit of rupee depreciation. So, if you are looking for a better diversification option then international funds can surely be considered.