If you are looking to diversify your portfolio, international and global mutual funds are a great option. These funds allow you to explore investment opportunities irrespective of geographical boundaries. So, let’s understand what global and international mutual funds are and what the difference between them is.

What are global mutual funds?

Global funds allow you to invest in companies worldwide, including your home country. Depending on the fund manager’s experience and expertise, you can hedge against country-specific risks while keeping diversification at an ideal level.

Here arethe features of global mutual funds:

• Investment is diversified and does not contain concentration risk. This is because global funds invest in various securities across several nations.
• The risk associated with investing in foreign markets is influenced by market conditions and policies unique to each nation.
• Returns fluctuate based on several factors, including world politics and currency exchange.

What are international mutual funds?

International mutual funds allow you to invest in companies not listed in your home country. These funds are also called overseas funds or foreign mutual funds. These funds offer good returns but come with a higher level of risk compared to domestic funds.

Here are the features of international mutual funds:

• The performance of the fund could be impacted by the current fluctuations in the markets of other nations and specific industries like real estate, IT, etc.
• International funds have the chance to profit from investments made during multiple economic cycles because they often invest in financial instruments in different nations.
• International funds can give you access o financial instruments not available in the Indian markets.

Difference between global and international mutual fund

• Country

The primary difference between a global and an international mutual fund is whether or not it invests in the domestic country’s markets. An international fund doesn’t invest in the domestic market; it only invests in markets elsewhere. On the other hand, a global fund will invest in every open market, including that of the country in which you reside.

• Diversification

Global funds are better suited for investors who wish to diversify their portfolio against risks specific to their country without excluding investments in their country. This works well when the investment portfolio is already low on domestic investments. However, for an investor whose portfolio has a high concentration of domestic investments, international funds may be a better option to diversify against country-specific risk.

Conclusion

Both global and international funds are good options to add international exposure to your portfolio. The one you should select primarily depends on your portfolio’s current asset allocation across domestic and international investments and your financial goals.

Also, an important thing to consider when investing in a global or international fund is the fund manager’s approach to managing the underlying currency risks. While some funds opt to employ tactics that may lessen the impact of currency fluctuations, others view currency changes – both up and down – as a component of portfolio performance.