“Can you suggest a good international fund?”<\/p>\n\n
I hear some version of this question quite regularly in my work as a SEBI registered investment adviser. Usually, I respond with another question:<\/p>\n\n
“If I hid the last three years of returns from you, would you still want to invest internationally?”<\/p>\n\n
Take a moment before answering. If the answer is still yes, there may be a genuine portfolio reason for investing abroad. If the answer suddenly becomes less certain, perhaps the attraction is not diversification. Perhaps it is recent performance.<\/p>\n\n
That is an important difference.<\/p>\n\n
There is nothing inherently wrong with international investing. An investor may want exposure outside India, access to businesses or sectors not adequately represented in India, or an allocation linked to a future foreign-currency expense. All can be reasonable.<\/p>\n\n
But there is a difference between “My portfolio needs a planned international allocation” and “This market has done very well. Which fund should I buy?”<\/p>\n\n
The first starts with the portfolio. The second starts with the performance chart.<\/p>\n\n
A good investment idea is not automatically a good portfolio decision.<\/p>\n\n
Imagine three funds. One has underperformed for five years. Nothing exciting has happened in the second. The third has produced spectacular recent returns and everybody seems to be talking about it.<\/p>\n\n
Which one are we most likely to research? Usually, the third.<\/p>\n\n
That is not stupidity. It is simply human behaviour. What has recently worked becomes easier to believe in. Once we like the story, words such as “diversification” can sometimes give us a respectable reason to do what recent returns already made us want to do.<\/p>\n\n
The biggest risk may not be investing abroad. It may be investing abroad for the wrong reason.<\/p>\n\n
Today, a few videos can introduce us to the US, Japan, Taiwan, Korea, China, global ETFs, semiconductor funds and many other ideas. Some of that content can be genuinely useful, and many finfluencers explain investment ideas well.<\/p>\n\n
The limitation is simpler:<\/p>\n\n
A video can explain why an investment is interesting. It cannot know whether your portfolio needs it.<\/p>\n\n
It does not know your goals, existing investments, ability to tolerate long periods of underperformance, or what you will do when today’s exciting market stops being exciting. A general idea meant for thousands of viewers still has to pass through one person’s financial plan before becoming an investment.<\/p>\n\n
Social media can tell us what is getting attention. It cannot tell us what our portfolio is missing.<\/p>\n\n
Recent performance has a strange effect on memory. Long periods when a market went nowhere gradually disappear from the story.<\/p>\n\n
Consider three examples:<\/p>\n\n
Japan:<\/strong> The Nikkei 225 reached its famous bubble-era record in December 1989 and surpassed it only in February 2024 \u2014 more than 34 years later.<\/p>\n\n Taiwan:<\/strong> The TAIEX peaked in February 1990 and surpassed that level only in July 2020 \u2014 roughly 30 years later.<\/p>\n\n Singapore:<\/strong> The Straits Times Index set a record in October 2007 and did not surpass that price-index level until February 2025 \u2014 more than 17 years later.<\/p>\n\n The point is not that Japan, Taiwan, Singapore were bad places to invest, nor that today’s popular international markets will repeat these periods.<\/p>\n\n The lesson is simpler:<\/p>\n\n A good country can have a disappointing market. A good market can have a disappointing decade. But markets do not know when our financial goals are due.<\/p>\n\n There is another trap hidden inside the word “international”. Sometimes it simply becomes shorthand for US investing; at another time, the fashionable destination may be Japan, Taiwan, Korea or China.<\/p>\n\n Different countries do not necessarily mean different risks either. Taiwan and Korea, for example, both have significant exposure to the global semiconductor cycle.<\/p>\n\n Diversification is not about collecting more flags in a portfolio. It is about understanding which risks we are reducing and which new risks we are adding.<\/p>\n\n For Indian investors, international funds also come with extra moving parts. Indian mutual funds face industry-wide overseas-investment limits of US$7 billion for overseas securities and US$1 billion for overseas ETFs. In 2026, fund houses including PGIM India and Edelweiss again restricted investments in some international schemes as available capacity became tight.<\/p>\n\n Add currency movements, different taxation and occasional investment restrictions, and the picture becomes less simple than the return chart suggests.<\/p>\n\n International equity is still equity. Crossing a national border does not make market risk disappear.<\/p>\n\n I don’t think there is one answer for everybody. Before adding an international fund, I would ask just three questions:<\/p>\n\n 1. Would I still want it if its recent returns were hidden?<\/strong> If most of the attraction disappears when the return chart disappears, that tells us something.<\/p>\n\n 2. What job will it do in my portfolio or financial plan?<\/strong> What risk does it reduce? What exposure does it add that I genuinely need?<\/p>\n\n 3. If it underperforms Indian equity for the next seven or ten years, will I still hold it?<\/strong> Diversification is easiest to believe in while the diversifier is outperforming. The real test of an allocation is whether its logic still makes sense when its returns stop helping the argument.<\/p>\n\n I am not making a case against international investing, nor am I making a case for it.<\/p>\n\n I am making a case for knowing why an investment belongs in the portfolio before deciding which product to buy.<\/p>\n\n Sometimes that process will lead to an international fund. Sometimes it will lead to no new fund at all. Both can be perfectly reasonable answers.<\/p>\n\n The fund should enter the portfolio because the plan needs it. Not because the performance chart made you want it.<\/p>\n\nInternational does not automatically mean diversified<\/h2>\n\n
Three questions before you invest<\/h2>\n\n
One final thought<\/h2>\n\n
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