International Mutual Funds Definition
The best known international mutual funds are equity funds, though you can also buy shares in international bond funds. Unlike global equity funds, which invest primarily in foreign stocks, but also own some U.S. equities, international mutual funds limit their holdings to non-U.S. company stocks. When choosing an international mutual fund, review the regions or countries represented, types of management and other factors.
Other People Are Reading
-
Philosophy
-
Investing in international mutual funds offers both growth opportunities and diversification within your portfolio. When non-U.S. economies and their companies are growing quickly, a mutual fund representing these economies and companies can add a strong growth component to your investments.
In addition, spreading your investment money across markets that are different from the United States helps you capture returns you might miss if those markets excel when U.S. markets are struggling.
Further, buying mutual funds instead of individual international stocks means the burden of researching foreign companies does not lie with you. Mutual fund managers take on this responsibility for you and other shareholders.
Fund Types
-
Within the international mutual fund market, you can find funds that represent developed regions, such as Europe and Asia, as well as funds with holdings in developing markets, such as Brazil, China and India. Emerging market funds generally are considered riskier than other international funds, according to "U.S. News & World Report," because of the volatility that is sometimes found in emerging market economies, but these funds also offer profit opportunities when emerging market economies are growing rapidly.
-
Index Funds
-
There's also a category called international index funds. These funds track a specific foreign market index and are passively managed, which means the managers set up the fund to mimic the index and do very little buying and selling of stocks throughout the year. The goal is to match returns for that index, and these funds typically represent both developed and emerging market countries.
Management
-
Since index funds are passively managed, they usually offer lower fees than actively managed funds, which buy and sell stocks throughout the year to reach specific goals. This buying and selling increases transaction fees within the funds and requires more manager research and oversight. These in turn increase the cost of fund ownership, but also may improve returns compared to passively managed index funds.
International Bond Funds
-
International bond mutual funds invest in bonds issued by foreign governments. These funds pay monthly dividends and sometimes hold U.S. bonds, but their primary focus usually is the debt of European and Asian countries. International bond funds are subject to interest rate fluctuations the same way U.S. bond funds are, but some consider international bond funds somewhat riskier than their U.S. counterparts, according to The Motley Fool.
-
