As we step into 2025, with Indian stock markets showing mixed performance, investors are increasingly exploring international mutual funds to diversify their portfolios and tap into global growth opportunities. These funds offer exposure to global markets, helping investors mitigate domestic market risks while benefiting from strong-performing economies. In this article we would talk about 5 Best International Mutual Funds to consider for 2025, reasons to invest, risk factors and conclusion on this.
What Are International Mutual Funds?
If you are new to mutual funds, consider checking How Mutual Funds work?
International mutual funds are investment vehicles that pool money from investors and allocate it to stocks, bonds, and other assets outside India. These funds enable investors to access global markets, providing opportunities that may be otherwise difficult to invest in directly.
Such funds can be classified based on their investment focus. Some target developed markets like the US, Europe, or Japan, while others invest in emerging markets like China, Brazil, or Southeast Asia. These funds are particularly attractive for investors looking to hedge against domestic market downturns and currency fluctuations.
For example, while Nifty-50 delivered minus 1.5% returns in the last six months and 8.9% over the past year, the Nasdaq 100 index surged by 19% in six months and 21% over one year. Clearly, global markets have shown stronger performance in comparison, making international funds an excellent option.
Best Performing International Mutual Funds for 2025
While several international mutual funds are available, here are the top-performing ones worth considering for 2025:
#1 – Motilal Oswal NASDAQ 100 Fund of Fund
- Focus: US Equities (NASDAQ 100)
- This fund tracks the NASDAQ 100 Index, which includes top global tech giants like Apple, Microsoft, and Amazon. With tech dominance in the US, this fund offers strong growth potential.
- Note: Currently, this fund is not accepting fresh SIP or lump sum investments due to SEBI restrictions. Investors can consider ABSL Nasdaq 100 Fund of Fund or Axis Nasdaq 100 Fund of Fund instead.
#2 – DSP US Flexible Equity Fund of Fund
- Focus: US Equities
- This fund provides diversified exposure to US markets by investing in leading global funds. It includes a mix of large-cap, mid-cap, and high-growth stocks, allowing investors to benefit from US economic expansion.
#3 – Franklin India Feeder – Franklin US Opportunities Fund
- Focus: US Equities
- This fund primarily invests in US companies, offering exposure to innovative and high-performing businesses. With US markets playing a key role in global growth, this fund has strong potential for long-term gains.
#4 – Nippon India US Equity Opportunities Fund
- Focus: US Equities
- This fund focuses on large-cap US stocks, with a strong track record in the tech and healthcare sectors, two industries driving US market growth.
#5 – Invesco India Global Equity Income Fund of Fund
- Focus: Global Equities with Income Generation
- This fund targets high-quality global stocks with both capital appreciation and dividend potential, making it ideal for investors looking for steady returns.
Performance of Top Global Mutual Funds (returns are annualised)
| Scheme Name | 1Y | 3Y | 5Y | 10Y |
|---|---|---|---|---|
| Motilal Oswal Nasdaq 100 Fund of Fund | 42.2% | 22.6% | 22.8% | NA |
| DSP US Flexible Equity Fund of Fund | 22.7% | 15.5% | 17.9% | 15.3% |
| Franklin India Feeder – Franklin US Opportunities Fund | 26.4% | 15.5% | 16.9% | 16.1% |
| Nippon India US Equity Opportunities Fund | 26.3% | 15.8% | 16.9% | NA |
| Invesco India Global Equity Income Fund of Fund | 20.7% | 15.0% | 15.6% | 11.5% |
Why Invest in International Mutual Funds?
1) Portfolio Diversification
Investing in global markets reduces risk by spreading exposure across different economies and industries, making the portfolio more resilient to domestic downturns. If you re planning to create good wealth (Like we indicated in our earlier article How to Create Rs 10 Crore wealth with Mutual Funds), then you must invest in global funds irrespective whether you are investing in our recommended mutual fund portfolio or not.
2) Access to High-Growth Markets
Markets like the US and China house world-leading companies in technology, healthcare, and other booming industries, providing lucrative investment opportunities.
3) Currency Hedge
International investments can benefit from INR depreciation. If the rupee weakens against the dollar, the value of US equity holdings increases.
4) Sector-Specific Growth
Investors can participate in fast-growing global sectors such as AI, electric vehicles, and biotechnology, which may not have strong domestic equivalents.
Risks of International Mutual Funds
1) Currency Fluctuations
Foreign exchange movements impact returns. If the INR strengthens against the USD, international fund gains may be lower.
2) Economic and Political Risks
Political instability, regulatory changes, or economic downturns in other countries can impact fund performance.
3) Market Volatility
Global stock markets, particularly in emerging economies, can experience significant fluctuations, affecting short-term performance. The volatility could be more or similar to Smallcap Funds as indicated in our Top 5 Smallcap Mutual Funds article earlier.
4) Higher Expense Ratios
Managing international investments incurs additional costs, leading to higher fund expense ratios compared to domestic funds.
Key Considerations Before Investing
1) SIP Vs Lumpsum
While one can consider investing in global mutual funds through SIP, there are situations one can invest in lumpsum too during market crash or during downtrends. You can get more tips at SIP Vs Lumpsum – How to invest for better returns article.
2) Long-Term Horizon
International funds are best suited for long-term investors who can withstand short-term volatility. A 5K can grow at similar pace in very long run compared to 50K SIP invested for medium to long term.
3) Taxation
- Short-term gains (< 3 years) are taxed as per individual tax slabs.
- Long-term capital gains are taxed at 20% with indexation benefits.
4) Fund Manager Expertise
Choosing funds with experienced managers who understand global markets is crucial for consistent returns.
Conclusion: International mutual funds are an excellent way for Indian investors to diversify and access global growth opportunities. While they come with risks, strategic investments in well-performing funds can yield substantial returns. Like I always say, before investing, consider your financial goals, risk appetite, and tenure of investment to maximise the returns.
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