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How To Invest Internationally with Mutual Funds

How To Invest Internationally with Mutual Funds

One of the greatest benefits of an increasingly “flat” globe is the ability for individuals to invest internationally, thus improving diversification and potentially earning higher returns or incurring less risk. While the market capitalization of the NYSE and NASDAQ combined is very large (approximately $19 trillion as of April 2011), the US exchanges are only a part of the $59 trillion global marketplace. Those investors who restrict their portfolio to only include US stocks are missing out on two-thirds of the entire world of investment opportunities.

However, investing internationally can be a daunting process, and much more confusing to the average investors than just investing in US stocks. Investing internationally means that you need to understand foreign exchange rates and study the economies of multiple countries, in addition to the inherent difficulty of being able to purchase stocks listed on foreign stock exchanges. Fortunately, international mutual funds allow the average investor to have access to a wide range of global investments while letting the professional money managers deal with the complicated logistics of overseas investing.

Investing in an international mutual fund is a very simple process—just the same as investing in any domestic mutual fund. After doing your research and selecting the mutual fund you wish to invest in, you just purchase the shares directly from the mutual fund company or through a broker, and the mutual fund company takes care of all the behind-the-scenes work such as converting currency and managing the portfolio.

Similar to domestic mutual funds, international mutual funds are available in a wide variety of styles or strategies. If you like technology stocks, check out the Kinetics Internet No Load Fund (WWWFX), which invests 30% of its assets outside the US, or the T. Rowe Price Global Technology Fund (PRGTX), which invests 36% of its assets overseas.

The unique aspect of international mutual funds is the ability to target particular countries or geographical regions. For example, if you want specific exposure to Latin America, you can purchase shares in any of a number of Latin American mutual funds, such as T. Rowe Price Latin America (PRLAX), which focuses on investing in countries such as Argentina, Brazil, Chile, Mexico, etc. If you are less specific and just want to invest in companies all over the world, try a global mutual fund such as John Hancock Global Opportunity (JGPNX), which invests 70% of its assets in non-US stocks in countries such as China, Brazil, France, Switzerland, Japan, India, and Canada, with the balance invested in US stocks, cash, and other investments.

International mutual funds are a great way to gain investment exposure to other countries, and are just as easy to invest in as domestic mutual funds. Stop limiting yourself to only a third of the global stock marketplace; your portfolio will thank you. 

 

 

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