International Mutual Funds Are on the Rise in 2025

The last six months have been a rollercoaster ride for equity markets worldwide. With Trump 2.0’s trade policies, ongoing geopolitical tensions, and foreign institutional investors (FIIs) pulling money out of India, domestic markets have taken a hit. If you have been tracking your mutual fund investments, you might have noticed that even strong categories like large-cap, flexi-cap, and ELSS have barely managed to generate double-digit returns in the last year.

But here’s the twist: International mutual funds have been shining amidst this turbulence!

Why Are International Mutual Funds Outperforming?

While Indian markets struggled, international funds delivered impressive returns. The average return from global funds (67 funds in total) has been around 14% in the last year. Not just that, some of the top-performing international mutual funds have generated returns as high as 100%!

So, does this mean Indian investors should start looking beyond domestic markets? Let’s explore.

Top 3 International Mutual Funds That Have Delivered Strong Returns

Mirae Asset Hang Seng TECH ETF Fund of Fund Growth

1-Year Return: 100.3% (As on 23/03/2025
Benchmark: Hang Seng TECH TRI

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DSP World Gold Fund of Fund Growth

1-Year Return: 55.5% (As on 23/03/2025
Benchmark: FTSE Gold Mines

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Mirae Asset NYSE FANG + ETF Fund of Fund Growth

1-Year Return: 43.9% (As on 23/03/2025
Benchmark: NYSE FANG+ TRI

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Why Should You Consider International Mutual Funds?

1. Diversification – Reduce risk by spreading your investments across different economies and industries.

2. Global Growth Potential – Invest in leading companies from the U.S., Europe, and Asia.

3. Currency Advantage – Benefit from holding assets in stronger foreign currencies like the U.S. dollar.

4. Risk Balance – When the Indian market experiences downturns, global investments can help maintain stability in your portfolio.

Understanding the Costs: Charges & Taxation

Before investing, it’s essential to know the costs involved:

Expense Ratio: Every mutual fund has an annual management fee.
Entry & Exit Load: Some funds charge a fee when you buy or sell units.

Is This the Right Time to Invest?

Given the volatility in Indian markets and the strong performance of select international markets, global diversification could be a smart move. However, it’s crucial to make informed decisions based on thorough research and professional advice.

How Often Should You Review Your International Investments?

It’s advisable to review your international mutual fund portfolio every 6 months to 1 year. If a fund consistently underperforms or if there are significant changes in global market conditions, you may need to adjust your investment strategy.

Potential Risks of Investing in International Mutual Funds

Every investment carries some risk, and international funds are no exception. Key risks include:

Geopolitical Risk – Political instability or economic crises in a foreign country can impact your investment.
Currency Risk – If the Indian Rupee strengthens against a foreign currency, your returns may be affected.
Market Volatility – Some international markets are highly volatile, making fund performance unpredictable.

Does the Currency Exchange Rate Affect Returns?

Absolutely! Since international mutual funds invest in foreign assets, exchange rate fluctuations play a crucial role in determining your returns. If the U.S. dollar strengthens, your investments may gain value. On the other hand, if the Indian Rupee appreciates, your returns could take a hit.

Final Thought: Should You Go Global?

International mutual funds offer a fantastic opportunity to diversify and benefit from global growth. However, they come with their own set of risks. A well-balanced investment strategy should consider both domestic and international exposure.

So, what do you think? Would you consider investing in international mutual funds, or do you prefer sticking to Indian markets? Share your thoughts in the comments below!