Investors across India and abroad, i.e. Non-residential Indians (NRIs) can invest in international mutual funds for growth exposure and better returns. International mutual funds are an investment vehicle that allows investors to invest in equity, debt, and other instruments outside India. These are also known as overseas or foreign funds and can be a good investment option to generate returns. The funds in international mutual funds for NRI are invested in the markets of the USA, Canada, Brazil, and other major countries globally.
How does International Mutual Fund Work?
International mutual funds work in a similar way to any other equity mutual funds where the funds are collected in INR and the fund manager invests the amount in foreign stocks by directly purchasing the stocks or investing in global funds consisting of stocks of various foreign countries. They are governed by the Securities Exchange Board of India (SEBI).
Investing in international funds allows investors to take advantage of the gains from global stock market performance. This can be a good alternative for investors looking to diversify their portfolios and add varied investment instruments to their portfolios.
Also read: Best Mutual Funds for NRI in India 2024
Who Should Invest in International Mutual Funds?
While both residents and NRIs can invest in international mutual funds after getting their Mutual Fund KYC done and linked to their NRE/NRO Bank account, there are still a few considerations to be made. We here have enlisted the type of investors who can invest in international mutual funds for NRI down below:
- Investors looking to Diversify their portfolio
- Investors who are looking to diversify their portfolio and add global funds can tap into this mutual fund scheme and invest their funds. Investing in global funds will give them an additional investment option and help to generate returns from global markets.
- Investors with good knowledge of International Markets
- Investors who are well-versed in international and global markets can invest in international mutual funds to help build a good income-generating investment option. International mutual funds allow investors to invest in companies such as MAANG, i.e. Meta, Amazon, Apple, Netflix, and Google along with other major companies like Nvidia, Tesla, and more.
- Investors who have a High Risk-High Reward Appetite
- Investing in international mutual funds is high risk at times. But it also comes with the caveat of high risk-high reward if the market is timed correctly. Investors who have higher risk tolerance levels and can park their surplus funds in these funds can opt for global mutual funds.
What are the Top 10 Best International Funds for NRI 2024
In this section, we look at some of the best international funds for NRIs 2023. We have created a list of the Top 10 Best International NRI Mutual funds regarding the overall fund performance and have also taken note of the expense ratio and other areas. These top international funds for NRIs are great options to start your investment.
Top 10 Performing International Funds for NRIs in 2024
| Fund Name | Fund Size (In Crores) | Expense Ratio | 1 YR |
| Franklin India Feeder – Franklin U.S. Opportunities Fund Growth for NRI | 3,291 Cr | 1.5% | 32.29% |
| Kotak NASDAQ 100 Fund of Fund Growth for NRI | 2,803 Cr | 0.7% | 38.67% |
| ICICI Prudential US Bluechip Equity Fund Growth for NRI | 3,002 Cr | 2.0% | 10.79% |
| PGIM India Global Equity Opportunities Fund Growth for NRI | 1,358 Cr | 2.4% | 34.19% |
| Aditya Birla Sun Life Global Emerging Opportunities Fund Growth for NRI | 255 Cr | 2.1% | 13.14% |
| Motilal Oswal Nasdaq 100 Fund of Fund Growth for NRI | 4,438 Cr | 0.6% | 41.88% |
| ICICI Prudential Global Stable Equity Fund(FOF) Growth for NRI | 119 Cr | 2.1% | 7.54% |
| Edelweiss Europe Dynamic Equity Offshore Fund Growth for NRI | 80 Cr | 2.3% | 5.78% |
| Bandhan US Equity Fund of Fund Growth for NRI | 281 Cr | 2.3% | 32.15% |
Also read: Best SIP to Invest in 2024 – Top 10 SIP Mutual Fund Plans for NRIs/OCIs
Types of International Mutual Fund
Below are the types of international mutual funds that are offered to investors, both residents and NRIs alike to invest into:
- Global Funds: Global funds are a type of international mutual fund that invests in the companies of the nations including investors residing country. Generally, global funds and international funds are confused as being the same but there is a major difference between them. International funds only invest in the companies except the country in which the investor resides.
- Regional Funds: Regional funds are another type of international fund that invests the funds into specific geographical regions like Asia, Europe, UK, Brazil, etc. These are well-suited for investors who want to invest in specific markets instead of global funds.
- Country Funds: Country funds are more specific to a country where the funds are invested into a particular country’s market, i.e. USA, Canada, UK, or more. These funds specifically aim to tap into the economy of the said country and generate returns from there.
- Global Sector/Thematic Funds: Global sector or thematic funds are funds that are invested across a particular sector. These funds aim to invest in one particular sector, i.e. tech, consumables, etc to leverage the market and generate returns for the investor.
Benefits of Investing in International Mutual Funds
Investing in international funds for NRIs and residents can offer several advantages Here are four key benefits of investing in international funds:
- Global Diversification: One of the primary benefits of investing in international funds is the opportunity for global diversification. By investing in international markets, you can spread your investment risk across different countries, industries, and currencies. This diversification can help reduce the impact of poor performance in a single market or region and enhance portfolio stability.
- Access to Global Markets: International funds provide access to markets and asset classes that may not be readily available in India. This allows you to capitalize on investment opportunities in regions with strong growth potential, diverse economies, and different market cycles. Investing globally can help you tap into markets that may outperform your domestic market.
- Currency Diversification: When you invest in international funds denominated in foreign currencies, you introduce currency diversification to your portfolio. Fluctuations in exchange rates can impact the value of your investments, but they can also provide opportunities for potential gains. Holding assets in multiple currencies can act as a hedge against currency risk and provide a degree of stability.
- Risk Management and Growth Potential: International funds can help manage risk by reducing your exposure to a single market’s economic or geopolitical risks. Additionally, they can offer access to industries and companies that are not well-represented in your home market. Investing in regions with different economic cycles can provide growth opportunities that may not be available in your domestic market, potentially enhancing your overall portfolio returns.
Factors To Consider Before Investing in International Funds
- Country and Geopolitical Risk: Different countries come with varying levels of political and economic stability. It’s important to assess the geopolitical climate and potential risks associated with investing in specific regions or countries. Consider factors such as political stability, regulatory changes, and geopolitical conflicts that could affect your investments.
- Currency Risk: Fluctuations in exchange rates can impact the value of your international investments. Be aware of the potential currency risk and how it might affect your returns. Currency risk can be both an opportunity and a challenge, as it can lead to gains or losses depending on exchange rate movements.
- Costs and Fees: Expenses such as management fees, administrative costs, and currency conversion fees can impact your returns when investing in international mutual funds. Always consider the costs and expenses before investing in international mutual funds alongside the tax implications for the gains generated.
Also read: Top 5 Tips for NRIs to Pick a Winning Mutual Fund
Taxation on International Mutual Funds
International mutual funds mainly invest in equities and equity-related investments in other countries. However, these are taxed as non-equity funds in India since they do not invest in the equity market domestically.
Hence, investments in international mutual funds will now be taxed as per the investor’s income slab regardless of the short-term or long-term gains since the Budget 2023 amendment has removed the indexation benefits.
That being said, international funds with less than 35% exposure in equity funds will be treated as equity-oriented funds and will be taxed at the investor’s slab rate for Short Term Capital Gain (STCG) for units held for less than 36 months. Similarly, Long Term Capital Gain (LTCG) will be charged at 20% plus surcharge for units held for more than 36 months and will get indexation benefits.
Invest in NRI International Mutual Funds with SBNRI
NRIs can now download the SBNRI App and choose to invest in different international mutual schemes in India with ease. You can also get detailed mutual fund advice from experts at SBNRI. Also, visit our blog and YouTube channel for more details.
SBNRI is an authorized Mutual Fund Distributor platform & registered with the Association of Mutual Funds in India (AMFI). ARN No. 246671. NRIs willing to invest in mutual funds in India can download the SBNRI App to choose from 2,000+ mutual fund schemes or can connect with the SBNRI wealth team to better understand Mutual Fund investments.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions. SBNRI does not intend to predict future returns, please read all related documents before investing.
Also read:
Best Debt Mutual Funds in India 2024 for Residents and NRIs/OCIs
List of Top Performing Liquid Funds for NRIs in 2024
Best Equity Mutual Funds for NRIs to Invest in 2024
What are Sector Funds? Best Sector Funds List for NRIs
Investing in ESG Mutual Funds? Read this before you make a move
FAQs
What is International Mutual Funds?
- International mutual funds are an investment vehicle that allows investors to invest in equity, debt, and other instruments outside India.
How can NRI invest in International Mutual Funds?
- An NRI can invest in International Mutual Funds using his/her NRE/NRO Account after getting their Mutual Fund KYC done. The NRE Account is used to invest on a repatriable basis and NRO Account is used to invest on a non-repatriable basis.
Are international mutual funds good investments?
- It depends on your investment goals and risk tolerance. Investment in international mutual funds could offer higher returns, but investment in such kinds of funds involves higher risk.
Why should an NRI invest in an International Mutual Fund?
- Investing in international funds allows NRI investors to take advantage of the gains from global stock market performance. This can be a good alternative for investors looking to diversify their portfolios and add varied investment instruments to their portfolios.
What is the taxation on International Mutual Funds?
- Investments in international mutual funds will now be taxed as per the investor’s income slab regardless of the short-term or long-term gains since the Budget 2023 amendment has removed the indexation benefits. That being said, international funds with less than 35% exposure in equity funds will be treated as equity-oriented funds and will be taxed at the investor’s slab rate for Short Term Capital Gain (STCG) for units held for less than 36 months. Similarly, Long Term Capital Gain (LTCG) will be charged at 20% plus surcharge for units held for more than 36 months and will get indexation benefits.
What Is the Difference Between an International Fund and a Global Fund?
- International funds are distinct from global funds, as they invest in companies around the world except the country where the investor resides while global funds invest in countries around the world including the country where the investor resides.
