Mahesh Kumar K emphasises that the true test for including international funds lies in long-term financial needs rather than recent performance, highlighting the importance of disciplined decision-making amid global market volatility.
The question of whether an international fund belongs in a portfolio often says as much about investor psychology as it does about asset allocation. Mahesh Kumar K, a SEBI-registered investment adviser, argues that the real test is simple: if the last 3 years of returns were hidden, would the investor still want exposure abroad? If the answer is yes, the case for international investing is likely rooted in planning. If not, it may be driven by recent performance.
That distinction matters because a good idea is not always a good portfolio decision. International exposure can make sense for several reasons: to broaden access to sectors and companies under-represented in India, to prepare for future foreign-currency spending or to reduce reliance on one market. But Kumar warns that many investors start with a performance chart rather than a financial need, then dress that preference up as diversification. Social media can intensify that tendency by making the hottest market or sector feel like a permanent opportunity, even though no video can assess an individual’s goals, time horizon or tolerance for years of weak returns.
History suggests why that caution is warranted. Japan’s Nikkei 225 did not surpass its 1989 peak until February 2024, Taiwan’s TAIEX took until July 2020 to reclaim its 1990 high and Singapore’s Straits Times Index only moved above its October 2007 record in February 2025. Those gaps do not prove international markets are poor choices. They do show that a strong country story does not guarantee a strong market result, and that investors who chase recent winners can overlook long stretches in which returns went nowhere.
Kumar also stresses that “international” is not the same as “diversified”. Buying foreign stocks does not automatically lower risk, especially if the chosen markets are tied to the same global forces, such as the semiconductor cycle in Taiwan and South Korea. For Indian investors, the complications can be greater still: overseas investment limits, currency swings, tax differences and occasional restrictions on fresh inflows all shape the practical case for these funds. International equity remains equity, and crossing a border does not remove market risk.
Recent coverage from Kiplinger and The Economic Times suggests that global diversification is once again drawing attention because of attractive valuations outside the United States, a potentially softer dollar and strong runs in overseas markets. But that same strength has encouraged performance chasing. The Economic Times reported that some international funds have delivered returns of up to 50% over the past year, aided by global tech gains and rupee weakness, while some fund houses have halted new subscriptions because of overseas investment limits. Analysts quoted by the paper have advised investors to stay disciplined, rebalance where needed and avoid treating a short-term surge as a permanent reason to add more exposure.
The more durable approach is to start with the role the investment is meant to play. Kumar’s three questions are straightforward: would the investor still buy the fund without the return chart, what specific job does it perform in the plan and would they hold it if Indian equities outperformed for 7 or 10 years? That is the real diversification test. If the answer is yes, an international fund may belong in the portfolio. If the answer is no, no amount of recent performance can make it the right choice.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
